I've had people swear to me that deregulation saves consumers money, but my research has actually revealed the opposite. Deregulation, an invention of our friends at Enron, actually costs consumers money. Deregulation inserts a middleman between you and the generator, and that middle man wants to get paid. While some may argue that the middleman can insert competition into a monopoly situation to result in savings, that's unlikely to happen. The monopoly is prohibited by regulation from the kind of usurious rate gouging that goes on in deregulated markets. Being from West Virginia I say this with a smirk on my face, because I am also unconvinced that our regulators actually have consumer interests in mind, and believe they will look the other way, or even encourage, regulated rip-offs of captive customers by out-of-state electric conglomerates.
Electric consumers in Pennsylvania's deregulated electricity market are up in arms because the state's regulators have not protected them from signing open ended variable rate contracts. What did they think "deregulated" meant? My experience has been that the average electric consumer is uneducated about his electric bill, the electric rates he pays, and the regulatory process, and he LIKES it that way! It is only when a bill shows up that seems to be higher than normal that average electric Joe gets upset and demands that "someone" do something to lower his bill!
Pennsylvanians who signed variable rate contracts with deregulated electric suppliers got slammed by PJM's markets during this year's "polar vortex." Customers received bills hundreds of dollars higher than normal because their middleman may have been locked into power purchase contracts that didn't adequately protect against price spikes caused by generator outages and high demand for natural gas to generate electricity. And, it's probably going to get worse. At its earnings call last week, FirstEnergy made it clear that the company's future power purchase contracts will contain language that passes this volatility through to customers:
Steve Fleishman - Wolfe
And in the future, do most of your contracts have that clause, so new ones do or not older ones or vice versa?
Leila Vespoli - EVP, Markets, and Chief Legal Officer
I think it would be safe to say that we are going to be adding that language where we can in the future.
FERC compounded the problem by allowing these greedy corporate entities to further game PJM's malfunctioning markets. FERC has allowed generators to charge whatever they want, and is in denial about any "harm" that may result:
FERC said PJM's proposal met the commission's criteria for approving waivers, as doing so would remedy a "concrete problem," would not harm third parties and would be limited in scope.
Deregulation sounds great in theory, but it rarely saves the consumer money in the real world.