CAEM's Fourth Edition of the RED Index contains scores for the United States, Canada, England, and Australia.

This year's report finds that electricity deregulation in the United States has stalled, and that utilities are experimenting with "virtual customer choice"

Now Available to the Public at No Charge Click here for access to RED Index 2003, the fourth edition of CAEM's RED Index, plus the Addendum to the RED Index 2003, which contains detailed results and data for individual jurisdictions

Progress in letting consumers choose their electric supplier has virtually ground to a halt in the United States, the latest edition of the Retail Energy Deregulation Index (RED Index) shows. As an alternative, however, experiments with “virtual choice” in regulated markets is picking up.

The fourth edition of the RED Index, issued by the Center for the Advancement of Energy Markets (CAEM) at the Edison Electric Institute’s National Accounts Conference, shows that California’s well-publicized troubles, the Enron collapse and the financial crisis in the energy industry have all but halted progress on electricity competition in the United States.

The most positive development in retail energy competition is the emergence of the North American Energy Standards Board (NAESB), the RED Index says.

The report notes that Texas continues to lead the United States in electricity restructuring, while progress continues in Canada, England, Australia and New Zealand.

The stall in consumer choice of supplier, the RED Index says, led some states to experiment with “virtual choice,” allowing consumers to choose from a richer menu of options added to the distribution utility’s traditional offerings. Oregon has taken the lead on virtual choice by offering mass-market customers a portfolio of regulated supply options that include renewable energy plans that rely on existing geothermal and wind sources, contributions to salmon habitat restoration, purchasing new wind resources and time-of-use rates. Other distribution companies have begun to offer weather-hedged or term products as well as green options and metering options.

CAEM sees virtual choice as a positive development. Ken Malloy, CEO of CAEM, commented, “While direct access is being refined in other jurisdictions, more skeptical jurisdictions can begin to both prepare customers for the eventuality of choice and support the development in the supplier community of innovative service and product offerings.” In response, CAEM will be issuing a new series of white papers – the Retail Energy Developments Report (RED Report) – to analyze emerging developments relating both to direct choice of supplier and virtual choice at the distribution company level.

Eight states lead the United States in giving customers the option of supplier choice. Texas leads the United States with a score of 69 out of 100, giving it a third-place ranking internationally. Pennsylvania, Maine, New York, the District of Columbia, Michigan, Maryland, and New Jersey all have laudable scores over 50. Click here to see a map showing the U.S. RED Index scores.

The best news on electricity restructuring comes from international experience, the RED Index says.

• England, ranking first internationally, increased its score to 88, by eliminating price caps on residential customers in 2002.
• New Zealand scored an impressive 75 and is ranked second internationally.
• Alberta leads Canada with a 61 (sixth internationally). In a significant flip-flop, Ontario’s RED Index Score, which had increased by 16 points, the greatest increase in 2002, dropped to 33 in 2003 as a result of the imposition of price caps on marketers in December 2002.
• Victoria leads Australia with a score of 50, ranking 11th internationally. Several Australian states continued to make progress as well. Both South Australia and the Australian Capital Territory now allow retail choice.

The most positive development in the United States, the RED Index says, is the progress made by NAESB. Its work, as was the case for its predecessor, the Gas Industry Standards Board, is quiet, tedious and largely unsung, but it is critically important to the future of energy competition because standards significantly lower the transaction costs for marketers and utilities, thus delivering benefits to consumers, the CAEM report states.

The RED Index is a reference tool that measures the progress states are making in moving from the monopoly model of public utility regulation to the competitive model. The index is based on 22 attributes that CAEM has identified as the foundation for an effective transition to competition.

The RED Index national score, averaging the scores of the 50 states plus the District of Columbia, has risen from 1 in 1997 to 17 in 2002 but plateaued at 17 for 2003. The median score is 4 and the mode is 0, indicating that the national average is skewed by the high scores of a limited number of states. A RED Index score of zero or less represents the traditional set of utility policies, or total monopoly; a score of 100 represents complete and effective implementation of the policies that CAEM believes are the necessary foundation of the customer choice or competitive model.

“Everyone wants to know how states have reacted to these events. The RED Index answers that question. It’s the only tool that quantitatively compares states to one another on a standard set of key measurements,” Malloy said.

The index focuses on retail competition and currently covers only electric restructuring. A similar index on gas restructuring is in preparation for issuance later this year. The RED Index Report is available to the public at no cost. If you would like to become a sponsor of the RED Index or receive a copy of the RED Report, send an email to kmalloy@caem.org. For general questions about the RED Index or its methodology, contact Nat Treadway, CAEM Senior Fellow, at ntreadway@caem.org