Liberty Power: Study: Arizona gets ‘D’ in energy market competition

Becky Pallack and Shelley Shelton
Arizona Daily Star
Feb 19, 2007

A lack of competition in energy choices is hurting small businesses in Arizona, according to a new study.

Arizona received a “D” grade on energy choices for small and mid–size businesses in a new report card from Liberty Power, an independent energy retailer.

The states with the best competitive electricity markets for small businesses are Texas and New York, according to the report, which grades states on a business consumer’s ability to compare prices, restrictions on shopping, protection from cost overruns, and the regulatory climate.

“Small businesses don´t have real choices in Arizona because utilities still own generation, which is used to set the benchmark price, making price comparisons difficult and shifting risk to customers,” according to the report card.

But the lack of ability to shop for an electric company has little to do with electricity rates, say local electricity suppliers.

“They (Liberty Power) might not understand the whole picture of what´s going on in Arizona,” said Romi Carrell Wittman, spokeswoman for Trico Electric Cooperative, which has about 31,000 customers around the perimeter of Pima County.

It´s apples to oranges to compare states to each other, she said.

“Some states are further along in their deregulation process than Arizona is,” Carrell Wittman said. Here, electricity rates are still determined by the Arizona Corporation Commission, she noted. Much of that has to do with the electricity debacle that caused rolling blackouts in California in 2001, said Heather Murphy, spokeswoman for the Arizona Corporation Commission.

“A large number of consumers back away from the idea” of deregulating electricity service in favor of competition, Murphy said.

“If you look nationally at what consumer trends followed that, I think there were a lot of people that might have thought about switching to a different provider and then thought it might be better to just stay with the one that they had traditionally used,” she said. “When we hear from the business community, it’s not so much that they want all these choices. Lately it´s been that they would be more in favor of certainty.”

The Corporation Commission regulates 16 companies, cooperatives and associations that sell electric power in Arizona, including Trico and Tucson Electric Power Co. The commission does not have authority over electric service provided by a city or municipality, irrigation district, electric district or utilities operated by tribal authorities. A January poll on small business expenses from the National Federation of Independent Business showed 69 percent of small–business owners ranked energy costs, including electricity and gasoline, among their top five largest business expenses.

It´s hard for small–business owners to plan ahead when they can’t see how electric costs are rising and falling, said Paul Ring, Liberty´s governmental affairs analyst. Arizona should require electric companies to make their bills clearer, with monthly updates on the actual cost of generating power, he said.

Florida–based Liberty Power competes with traditional investor–owned utilities in Texas, Maryland, New York and Washington, D.C. “The state kind of opened up its market in 2000, but regulators made a decision a couple of years ago not to go to full competition,” Ring said.

What Arizona is doing right is not restricting consumers from shopping around for the lowest price on power, he said. It’s still possible for another company to come in and offer a different supplier to consumers, said Art McDonald, a spokesman for TEP.

But the way the market is now, it’s better to continue operating in a regulated market where there´s oversight, to ensure customers are paying a fair price, he said.

Contact reporter Becky Pallack at 573–4224 or at bpallack@azstarnet.com.

Contact reporter Shelley Shelton at 434–4086 or at sshelton@azstarnet.com.

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