Competition is generally perceived to be a good thing that produces benefits to consumers, but some doubt its efficacy when it comes to electricity. How can the theory of competition be reconciled with the facts of customer choice? The answer lies in recognizing the difference between customer choice among retail customers and competition among generators in the wholesale market. Retail customers generally are not motivated to switch suppliers due to small savings, uncertainty about the alternatives, or better things to worry about. As a result, much like voters who do not vote, retail customers end up stuck with an incumbent who feels secure in their position and finds it unnecessary to compete.

On the other hand, wholesale competition has spurred substantial entry into the market by new, non-utility generators. While prices have risen in part due to increasing fuel costs, competition in the wholesale market has produced a stable supply of relatively low-cost energy. Ease of entry, stability in pricing, operating efficiency, technological advances; these are hallmarks of successful competition. Benefits achievable through wholesale competition can be realized by retail customers without the expense and risk of a retail choice program.

Marc E. Lewis
Vice President
Indiana Michigan Power Company