It’s been a quarter-century since Pennsylvania took the step to fundamentally change its energy market to give customers the ability to choose their own electric supplier, encouraging them to shop around and compare prices.

Former Gov. Tom Ridge signed the Electricity Generation Customer Choice and Competition Act of 1996 into law on Dec. 3 of that year, and business and energy leaders of today gathered virtually on Tuesday to talk about the impacts of the legislation that resulted in Pennsylvania customers paying electricity rates lower than the national average after being one of the most expensive states in the country for electric generation.

Data from the Pennsylvania Public Utility Commission shows that more than 1.5 million residential and 300,000 non-residential customers have taken advantage of the program, being provided more than 85 million MWh of electricity.

Former FERC Commissioner Nora Mead Brownell | PG&E

Nora Mead Brownell, former FERC commissioner and a founding partner of ESPY Energy Solutions, sat on the Pennsylvania Public Utility Commission when the law went into effect. She called the debate in the legislature at the time “intense,” with many outside pressures influencing its development.

Brownell said while she’s excited to see what happens in the future with the competitive market program, its benefits have already created lasting impacts on the state, ranging from declining carbon emissions caused by retiring uncompetitive coal-fired generators to increased capacity and efficiencies for nuclear plants, “bringing value to customers.”

One of the “amazing” parts of the development of the competitive market, Brownell said, was the number of customers who chose to source their generation from green energy even though it was more expensive, something that wasn’t anticipated. Brownell said that choice sent a market signal, leading to investment in renewable energy like large wind farms in the western part of the state.

“Markets send signals, and individuals have options to express their preference,” Brownell said.

Business Impressions

Kevin Sunday, director of government affairs for the Pennsylvania Chamber of Business and Industry, said the state “took a major step forward” in 1996 in the restructuring of its electricity markets. Sunday said the legislation “turned into a national example” of how to take risks off ratepayers and place them on the private sector where they could compete on prices and foster more efficiencies.

Over the last 25 years, Sunday said, Pennsylvania not only became the largest power producer in PJM, but it is now the largest net exporter of power of any state in the country. He said the energy exports to PJM are a “boon for reliability,” driving investments to areas of need.

“This landmark law has provided a foundation for energy policy long into the future,” Sunday said. “By empowering businesses and individuals with the choice to select the energy that makes the most sense for them, and rewarding innovation, the economy and the environment both win.”

Rod Williamson, executive director of the Industrial Energy Consumers of Pennsylvania (IECPA), said there were three key benefits to the legislation for large industrial customers.

The first was more competitive pricing, Williamson said, pointing to data from the Energy Information Administration that showed Pennsylvania had the ninth highest industrial electricity rates in the U.S. in 1995, a year before the law. In 2020, Pennsylvania ranked 30th in industrial electricity rates, coming in below the national average.

A second benefit was greater pricing flexibility and structuring the electricity supply. Williamson said companies are now able to lock in prices for years in advance, allowing for greater budget certainties and the ability to adjust operations to utilize lower market prices in off-peak times.

The third benefit was greater flexibility in the type of generation and the ability to seek lower carbon forms of generation. Williamson said some industrial customers are demanding more renewable energy sources, and the competitive electricity market allows them to control the type of renewable generation they’re purchasing.

“It’s for these key reasons that IECPA supports competitive energy markets and regulatory structures that facilitate a consumer’s use of these markets,” Williamson said.

David Taylor, CEO of the Pennsylvania Manufacturers’ Association, said energy is one of the most important inputs for manufacturing, which makes up $93 billion of Pennsylvania’s economy. Taylor said enormous amounts of energy are consumed in the manufacturing process, and it’s a major “advantage” for the state to have “affordable, reliable, market-priced electricity.”

Taylor said the health of the manufacturing sector leads to the health of Pennsylvania’s economy.

“Competitive markets are foundational to Pennsylvania’s future economic success, and there is no going back,” Taylor said. “This is a benefit all consumers enjoy, but especially large energy-consuming manufacturing employers that employ the most people, add the most value and have the strongest multiplier effect on economic growth.”

Past and Future

When asked about the biggest challenge that had to be overcome in getting the competitive market law enacted in 1996, Brownell said “misinformation” and a desire by generating companies to remain the “monopoly provider” of electricity. She said competing goals led to a “brutal battle” with “enormous” amounts of political pressure.

Brownell said she didn’t blame generating companies who wanted to retain their positions, but as a policymaker, her job was to “deliver value for the customers, large and small.” She said the resulting jobs created as well as the resilience and reliability of the electricity supply from the competitive markets have all been “critically important” to the state.

As for the future of the competitive market, Brownell said there continues to be a challenge of educating the public on the benefits of the markets. She said the lower prices are the most visible benefit, but the resulting innovations have created a more resilient electric system.

Brownell said one action that can be taken is continued review and evaluation of the program to foster improvements.

“There’s no change that can’t be improved by continuing to evaluate outcomes, so it’s not a once and done deal,” Brownell said. “Markets evolve, so we need to continue to evolve to find better ways to help customers make different choices and expand the opportunity for them to manage their own energy use.”