The energy transition and electrification of everything is driving the rapid growth of demand for electricity in the United States, creating challenges in the existing transmission and distribution infrastructure needed to keep pace with demand.
Distributed energy resources (DERs) like solar roofs and battery storage offer a flexible solution to this challenge while creating a more resilient and reliable electricity system. At the same time, advanced energy and information technologies create an opportunity to modernize the electric power grid. This modernization and growth in DERs give consumers more freedom to choose their energy and service providers. More consumer choice will reduce electric bills, enhance reliability, and improve the environmental performance of the power sector. The regulatory framework for the electricity system in many parts of the country, however, has not kept up with technology, creating barriers to full energy freedom for consumers.
The retail, and in some cases the wholesale, electric power system in many regions of the country has been largely run and regulated the same way since the early 1900s. The existing patchwork of state regulatory policies results in inconsistent capture of the value of our rapidly evolving energy technologies. Regulation of wholesale electricity markets changed significantly beginning in the 1990s, but major barriers to advanced technologies and consumer choice remain. Policy reforms are needed to create a modern, 21st century power grid.
DERs now enable non-utility entities, including consumers, to play a larger role in meeting the energy needs of those served by the grid. Rapid advances in information and communication technologies are making it feasible and convenient for consumers to provide other energy services to the grid, including unlocking demand-side grid management at times of peak demand. These advanced technologies enable the grid to become a platform that links consumers and retail electricity services companies to the wider wholesale power market and grid operations.
A regulatory framework inherited from the last century, however, is blocking this transition. Much of the framework was developed for a system that relied almost exclusively on large monopoly utility-owned power plants. It is time for the regulations to catch up with the 21st century and deliver the choice and value consumers want. Well-designed competitive retail and wholesale markets are essential to creating a 21st century grid and should be established nationwide.
The following principles provide a unifying foundation for well-designed consumer choice in retail electricity markets, as well as the associated transmission and distribution system operations.
Principles of Energy Freedom
Consumer Choice. Customers should have a choice regarding who supplies their energy and the type of rates they have access to, from standard flat rates to time-of-use and even real-time pricing rates, in which case they may choose to adjust their consumption patterns to reduce their electricity costs.
Encourages Electrification. As electricity becomes cheaper, while other energy prices remain more volatile, customers are incentivized to switch to more electric devices, including vehicles, appliances, and HVAC systems.
Encourages Other Energy Services. Energy suppliers can also effectively provide incentives, programs, and services to reduce customers’ energy consumption, reduce peak demand, and help consumers invest in onsite generation, energy storage, and other behind-the-meter energy technologies to manage energy usage better.
Reliability. Customers should expect access to electricity that is nearly 100% reliable.
Competition. Competitive markets lead to higher quality and lower cost options.
Transparency. Consumers should know what energy and services they are paying for and why. Retail prices should reflect the wholesale prices and not be affected by other costs, nor should they change substantially after an initial introductory rate.
Right to Switch. Consumers should not be locked into long-term contracts with a given energy supplier when switching to another supplier that better meets their preferences is beneficial.
Timeliness & Accuracy. Consumers should not be held responsible for delays in enrollments, routine billing problems, or any mistakes caused by their energy suppliers.
Property Rights. Consumers should be allowed to generate and store their own electricity and be fairly compensated for any excess generation they contribute to the grid.
Right to Data. Consumers should have the right to access their data in real time and share that data with third-party suppliers and service companies.
Economic Development. Consumers and their communities should benefit from the jobs created and investments made due to the growth in the clean energy economy.
Equity. All customers should have access to a wide variety of energy supply options.
Governance. Consumers should be protected from charges and fees. Any energy supplier that can charge its customers fairly should be allowed to serve them, while collusion among energy suppliers to raise rates should be prevented.