Getting the right recipe for retail competition
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06 Mar 2012
We’re about to publish a superb article by Professor Stephen Littlechild on how regulators in jurisdictions where there is retail competition may go astray by being overly prescriptive.
Professor Littlechild’s article – “Ofgem’s Procrustian Bed” – takes issue with the regulator of electricity and natural gas in Great Britain on its new one-size-fits-all rule, which seems aimed at stimulating more customer shopping for service and switching to new suppliers. But Ofgem’s approach, Littlechild argues persuasively, will likely restrain ingenuity and differentiation among suppliers, as it would limit standard offers that suppliers may make, and also set the monthly fixed charge each supplier may charge.
Britain was one of the first nations in the world to introduce retail competition in electricity service, and has been the longest at it as Professor Littlechild well knows. A globally-recognized expert on competition in previously monopolistic industries, he was the first Director General of Britain’s Electricity Supply and also headed its Office of Electricity Regulation (the electric predecessor to Ofgem, which deals with natural gas as well as electricity). In short, he was there at the start and has never quit the field.
His article addresses each of the claims that were raised as justifying Ofgem’s proposed narrowing of supplier offerings, and he persuasively dispatches each as being inapposite and misguided.
“Ofgem’s Procrustian Bed,” in addition to being a delightful read, deals with many arguments that have been raised in restructured states in the US as well. It’s essential reading for regulators in restructured states, as well as for their utilities, competitive suppliers, and customers.
In the US, restructured jurisdictions include Pennsylvania; New Jersey; Maryland; Delaware; the District of Columbia;, New York; all of New England, except for Vermont; Ohio; Illinois; and Texas. Other states, such as Michigan, Montana, and Oregon, have allowed competition but only to a limited degree.
If you are a subscriber to ElectricityPolicy.com and ElectricityPolicy Today, you already have access to Professor Littlechild’s article.
— Robert Marritz, Editor & Publisher
