Summary of ABACUS Report for ARM – 6-14-2007 The ABACUS report is actually more of a report card than actual report. It has three primary focuses: 1) Identifying markets that are implementing retail electric competition well or not implementing retail electric competition well; 2) features and elements that are required for a successful implementation of a competitive retail electric market; 3) recommendations for implementing a successful competitive retail electric market. 1) Markets overview – Assessment of 30 North American markets (28 in the US, 2 in Canada): o On the report card, Texas, New York and Alberta were the only markets identified as making good or excellent progress (Texas is the only market identified as making excellent progress). o The rest of the markets were making medium to no progress at all for a variety of reasons. o Texas’ success is attributed to “the deliberate choices made by the Texas Legislature, regulatory commission, independent transmission system operator, and electricity market participants.” The report goes on to say that “as a result, all Texans eligible to choose are now served by competitive retailers via non-regulated products and services. A significant number of retailers are active in every portion of the state.” 2) Features and Elements of a Successful Competitive Market: o There are four general areas that need to be implemented successfully for a competitive retail electric market to thrive: Status of retail choice: lots of retailers; large percentage of the population has choice; etc. Wholesale market competition: large and small electricity customers allowed to participate in wholesale reliability and capacity markets; Default service/ provider of last resort: to what extent is default service designed to provide a substitute for the choices provided in the competitive retail market; Facilitation of the choice of retailer: customer education; easy access to customer information; etc. o Although there are a number of factors that figure into the success or failure of a competitive retail electric market, default service is the primary one that can determine the success or failure of a competitive retail electric market. 3) Recommendations: o On the findings of the report card, ARC recommends 9 elements that need to be implemented to ensure a successful competitive retail electric market. Recommendations include: allowing customers to participate and have choice; support for nodal design; default service as a transition mechanism; separate competitive services from regulated services; standards for customer information. Key Takeaways: o Texas is the shining example of the best competitive retail electric market in North America. o Rules around default service/provider of last resort are the single most important element to building a successful competitive retail electric market. o The report lays out 9 specific recommendations for legislators and regulatory commissions when setting up competitive retail electric markets.
ARM Talking Points Around ABACUS report: o The ABACUS report card points out that Texas is the only state doing an “excellent” job with retail electric competition. There is very little need for any legislative tinkering or involvement to “fix” the market. o Any attempt to implement price controls or provide and “out” for customers (through default service) will hamper competitive efforts. o Ultimately, customers benefit from the number of choices that exist in the Texas market – month-to-month plans, long-term plans, “green” plans, etc.