there are many users of electricity who
are not at all critical about electricity
markets. They are enjoying having at
least several vendors bid on their loads
and appreciate being able to choose.
Users who highly value the ability to
choose green alternatives are learning to
buy electricity as they learned to buy gas
10 years ago. To them, it is a price risk
mitigation exercise, something not done
once a year and forgotten about (though
some do buy that way); rather, pieces of
requirements are bought for varying
terms going forward as buying opportunities are seen, even in imperfect markets.
Why Dichotomy?
Why the split among users? Why do
some relish marketplace products and
opportunities while others focus upon
‘screen traders,’ improper marketplace
dominance by electric utility-affiliated
generators and future electricity price
shock, and therefore want to decouple
themselves from markets? The answer
may lie with the newness of both the
retail and the wholesale markets. The
users who have been the closest to electricity industry restructuring (the early
advocates of markets) see the imperfections in both wholesale and retail marketplaces much more clearly than do some
of the newer players, who are content to
take advantage of the offerings of the
imperfect marketplaces that exist today.
District energy managers who are
buying electricity in restructured states
are likely seeing this dichotomy firsthand. They are being provided options
in buying electricity much like what they
see when they’re buying natural gas.
Whether or not these options and the
number of competing sellers are sufficient will vary from state to state. District
energy managers should be aware that
continued changes are on the horizon as
the wholesale markets mature and as the
rules and regulations for state-by-state
retail markets change. At this point,
however, the major change agent – the
primary factor influencing the price of
electricity for district energy managers –
is the price of raw energy, be it coal, fuel
oil or natural gas.
The viewpoints expressed in this article
are the perspectives of the author and do
not represent the perspectives of NRG.
Tim Merrill is general manager
of NRG Energy Center Pittsburgh.
Before joining the company in 2003,
he consulted for various energy
marketing businesses in their efforts
to build competitive retail markets.
A part of the energy industry restructuring and
deregulation scene since the early 1970s, Merrill
founded one of the country’s first gas marketing
companies in 1976. He has testified before
numerous state utility commissions, as well as
the U.S. Department of Energy and the Federal
Energy Regulatory Commission, and has given
more than 100 speeches on energy policies and
the evolution of the gas and electricity industries.
A Yale University graduate with a bachelor of
engineering degree, Merrill received an MBA
from the University of Pittsburgh. He may be
reached at Tim.Merrill@nrgenergy.com.
