George Nethercutt: It’s time for Washington state to establish a competitive electricity market
Tue., Aug. 31, 2021
By George Nethercutt
Competition is the key that has made the American economy the world’s greatest. That’s why President Biden’s latest executive order calling for greater competition in various industries such as health care, transportation, and others makes sense. Increasing competition is the smartest way to lower prices, increase wages, and promote economic growth.
This has been the case in electricity markets as well, where the Western Energy Imbalance Market has created $1.28 billion in benefits since 2014. There’s an opportunity to expand access to competitive electricity markets in most of the Western Interconnection – including Washington State – and it’s something officials in Olympia should seriously consider.
Many states are already adopting plans to decarbonize their electricity grids and catalyze the transition to renewables. That is certainly true for Washington, whose Clean Energy Transformation Act (CETA) has created a pathway and timeline for Washington to reach 100% clean electricity by 2050.
I have been a longtime proponent of advancing clean energy. In 2002, I supported the Renewable Fuel Equity Act, which expanded the investment tax credit to include equipment used to produce electricity from geothermal, solar, biomass, and hydropower sources. However, it’s important to ensure that Washington State’s transition to renewables is achieved without compromising reliability.
Competitive energy markets have a proven record of lowering energy prices, maintaining reliability, and reducing carbon emissions. In fact, a 2017 report from the Retail Energy Supply Association found that customers in states that still have the traditional monopoly utility structure saw their average energy prices increase nearly 19% from 2008 to 2017, while prices fell 7% in competitive markets. Competitive markets save people money and can promote environmental policies. For example, the energy market in Texas has incentivized more investment in wind energy than any other state.
Plus, competitive markets promote resource planning across the region, which are usually more beneficial to customers, compared to decisions made by individual utilities. Markets also allow many utilities to pool their resources across a larger geographic footprint, allowing for the use of the most affordable means of power generation, depending on the time of day.
Fortunately, momentum is building to establish more competitive electricity markets. In June, a bipartisan group of former federal regulators urged current officials at the Federal Energy Regulatory Commission (FERC) to expand organized wholesale power markets across the U.S., citing higher levels of renewable energy and “substantial customer benefits.” That’s because more than 80% of renewable generation has been deployed in competitive markets, which have been proven to be more effective for deploying renewables than monopoly models.
While there is no doubt hydropower will continue to dominate in Washington (it accounted for 62% of power generation in 2019), that energy source still has its challenges, including sensitivity to heat waves. To maintain reliability, we must continue diversifying, adding more wind, solar, and dispatchable resources (including natural gas as a bridge fuel) as part of a balanced energy mix. A competitive market can help drive that diversity and help strengthen our overall reliability, alongside hydropower.
The tool to get there is establishing a regional transmission organization (RTO). Pooling energy with other states makes sense when pursuing lower costs and greater reliability. In June, both Colorado and Nevada enacted clean energy legislation requiring that their states join RTOs by 2030, joining a host of voices who have called for Congress to study the benefits of RTOs and competitive markets. One coalition of stakeholders also called on Congress to conduct a first-of-its-kind cost analysis to get a better understanding of the impacts on cost and reliability of organized power markets. Even Richard Glick, the FERC chairman, joined “the chorus of those who have been calling for the West to form one or more RTOs soon.”
U.S. Representative McMorris Rodgers, who now occupies my former seat in Congress, recently talked about the need to “promote free-market technological innovation.” That can be applied to the electricity sector as well. The Congresswoman’s unique position on the House Energy and Commerce Committee could be key to kick-starting a move by Washington state toward more competition in the electricity sector, including joining an RTO. With her help, consumers in Washington state could benefit with more options to select different plans and enjoy lower prices.
It is possible for Washington state to continue moving toward a cleaner grid, but we need competition to truly get there. State leaders and our voices in Congress like Representative McMorris Rodgers should begin work on transitioning Washington state into a competitive market and start discussions with our neighbors – including California’s EIM – about forming a Western RTO. Increased competition will ultimately provide lower energy prices, improve reliability, increase investment in renewables, and move Washington State toward a cleaner energy future.
George Nethercutt previously represented Washington state in Congress from 1995 to 2005 and is an attorney.
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