Where are Utilities Excelling in Customer Service?

On January 16, PJM had a significant day filled with various developments that made waves in the energy community. The governors of states within PJM’s territory convened at the White House to address market concerns, the Energy Dominance Council articulated plans to reintroduce large power plants to address generation issues, and the RTO’s Board of Managers issued directives for operational and market adjustments, including revising load forecasting methods and creating strategies for large load customers.

Amidst these discussions and proposals, the energy community anticipates that these concepts will eventually make their way to FERC for further action, as Commissioner David LaCerte noted during FERC’s open meeting on January 22. This indicates that while plans are being put forth, the practical solutions are yet to be implemented.

To find successful models for addressing these issues, policymakers should consider looking beyond PJM and explore the achievements of vertically integrated utilities. These utilities, which own and operate generation, transmission, and distribution components, have been effective in protecting customers from price fluctuations and fostering economic prosperity in regions like the Southeast.

Statistical data from 2024 underscores the advantages of vertically integrated utilities over deregulated markets. Residential consumers in states with integrated utilities paid 42% less for electricity compared to those in deregulated states. These findings exemplify that the promise of competitive markets delivering lower prices has not materialized, causing considerable financial burdens on residential customers in states that adopted deregulation.

The enduring success of vertically integrated utilities is not incidental but rather a consequence of a business model designed to serve the public good and prioritize customer satisfaction. The Federal Power Act opted for this approach recognizing the substantial investments required for electricity infrastructure. This infrastructure is crucial to meet the extensive planning demands, ensuring a seamless balance between supply and demand over prolonged periods while securing cost-effective and low-risk resource procurement.

The symbiotic relationship between vertically integrated utilities and state regulators is fundamental to the industry’s accomplishments. State regulators act as gatekeepers, overseeing utility operations to guarantee fair pricing, cost transparency, and equitable distribution across all consumers. This regulatory oversight is essential to fostering growth within states while safeguarding consumer interests.

Despite the proven track record of vertically integrated utilities in benefiting consumers, advocates for competition persist in advocating for its expansion across the energy sector, including advocating for competitive transmission projects. However, evidence suggests that the outcomes of competitive transmission projects mirror those of electricity markets. The system of competitive bidding for transmission projects often fails to deliver actual savings to customers. Moreover, competitive transmission projects frequently face challenges such as cost overruns and regulatory delays, highlighting the limitations of the competitive model.

In conclusion, the enduring success of vertically integrated utilities and the regulatory oversight they operate under demonstrate the viability of this model in securing consumer protection, fostering economic prosperity, and ensuring efficient resource allocation. Policymakers should consider these proven outcomes when evaluating potential solutions for the energy sector, recognizing that customer-centric approaches are key to achieving sustainable industry growth and stability.