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Priority 1 = Price Competition

Priority 1 = Price Competition. Retail price to compare in PA provides for real competition. Wholesale price to compare in CA means few switchers. Creating a Vibrant Retail Market. The threshold issue is price competition drives suppliers into the market drives customers to go shopping

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Priority 1 = Price Competition

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  1. Priority 1 = Price Competition Retail price to compare in PA provides for real competition. Wholesale price to compare in CA means few switchers.

  2. Creating a Vibrant Retail Market The threshold issue is price competition • drives suppliers into the market • drives customers to go shopping Two fundamental questions: • what price does non-choosing customer see • can default supplier exert market power

  3. Pennsylvania Price to CompareMany suppliers offer residential choices

  4. Price Competition & Public Policy Each of these policy decisions affects the others and the potential for retail price competition. Default Service STRUCTURE & PRICE (POLR) Stranded Cost Recovery (CTC) Price to Beat (Shopping Credit/ Back-out Rate) PRICE COMPETITION Rate Cut / Rate Freeze

  5. Wholesale v. Retail Supply Costs * Savings based on a 800 kWh/month usage with an 8cents/kWh default service rate, saving 4% on wholesale and 12% on retail costs.

  6. Market Power Mitigation Matters A Default Supplier serves all non-choosing customers at a lower cost than competitors • no marketing costs • no switching costs • instant economies of scale - retail and wholesale Retail market power can be exerted 2 ways • control prices - either high or low • prevent entry of competitive suppliers

  7. Default Service Provider Spectrum Atlanta Gas: Default service shared by all marketers Maine: Full competitive bidding before market opening More Competitive Pennsylvania: Partial competitive bid after market opening Texas: Regulated, utility affiliate default service California: Regulated, utility default service

  8. Default Service Pricing Spectrum No default service: retail market price - AGL Market bid wholesale + administrative retail adder More Competitive Administratively set retail price, fuel adjusted - TX Administratively set retail price - MA Market indexed wholesale price - CA

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