The dramatic success of electric choice since the onset of the recession is changing the paradigm. As more states place more power in the hands of consumers, the burden of proof is shifting from advocates of electric choice to advocates of traditional monopoly regulation.

Not long ago electric choice was seen as a risky proposition, one that would leave consumers exposed to unscrupulous suppliers.  Opponents of industry restructuring warned of wild increases in prices in the absence of traditional rate-of-return regulation of generation. Yet, almost two decades later, those concerns have failed to materialize.

Residential prices in competitively restructured states declined by 1.7 percent between 2008 and 2011 while average residential price in the traditionally regulated monopoly states increased by eight percent.

Additional evidence of choice?s price superiority to monopoly-style regulation can be seen by looking at natural gas utilization. Data suggests that monopoly states have been unable to capitalize on low gas prices. Retail rates in competitive states fell by five percent from 2008 to 2011 while retail rates in monopoly states increasing by seven percent over the same time period.

There?s no question lower consumer rates were driving force of competition, but it is only one reason why states pursued competitive markets. In the 1990?s, states were dealing not just with rising electric rates, but a combination of challenges facing the electricity industry.

These included excess generating capacity, costly nuclear projects, and angry and migrating industrial customers. Market pricing succeeded in balancing generation, making nuclear plants more efficient and pleasing industrial customers by offering customized options designed to lower their electricity consumption.

In addition to lower rates and addressing inefficiencies in the industry, price signals more promptly conveyed in choice states than the monopoly states. The conveyance of price signals to inform customers of supply-demand was a key goal of the earliest advocates of relying on market forces for electricity supply pricing.

It isn’t far fetched to imagine that the competitive model will soon overshadow the market share held by rural cooperatives and traditional monopoly structures.