HOUSTON, TX. - December 10, 2008 - The Energy Retailer Research Consortium (ERRC), an independent research consortium that supports retail energy choice, issued companion reports today on the status of retail electricity competition in residential and commercial/industrial markets. The reports identify the successful markets in North America and explain policy choices that led to those successes.

"Well-structured, competitive electricity markets give all customers choices to manage their energy bills," said Nat Treadway, the ERRC Projects Manager. "Competitive electricity markets create new economy, clean energy jobs and promote technological innovation for a 21st Century electric infrastructure."

According to the ABACCUS report, commercial and industrial customer choice is thriving in many US states and Canadian provinces because well-designed and structured electric markets foster the introduction of numerous product offerings and services that were not available in traditional electric markets. A significant variety of products and services is available today, including: locking in energy prices for a year or more, indexed energy prices, hourly energy pricing, green or renewable products, the bundling of maintenance services with electricity purchases, the development of on-site power generation, premium power quality services, backup power and reliability services, energy efficiency services and opportunities for customers to participate in bulk power markets.

Additionally, residential consumers (the mass market) are benefitting from customer choice in several areas and are poised to reap additional benefits from rapid technological change moving forward. New infrastructure investments "“ such as advanced meters, communications and control "“ will allow entrepreneurial retailers to develop innovative pricing and service choices in addition to the many options that are already available today for small consumers. Consumers will have the ability to lower their total energy costs, increase their control over energy costs, reduce their impact on the environment, and increase the value of electric services in their lives.

The reports identify Texas and New York as leaders in the US. Appropriate policies in these states have resulted in the creation of vibrant competitive electricity markets with numerous retailers and service choices for customers of all sizes. The reports also identify the Canadian province of Alberta as a leader where its policies have fostered choice for residential electricity customers.

Mr. Treadway explained that social and economic goals "“ those relating to energy efficiency, renewable energy development, the environment, and job creation "“ are well suited to competitive electricity markets. "An appropriate market platform can turn challenges into opportunities," he said. Organized markets also have mechanisms that allow direct customer participation in demand-response to enhance reliability, improve economic power dispatch and improve the moment-to-moment operation of the electric network.

Some of the recent criticism of competitive markets is also addressed in the report. One hears that "rates are increasing in competitive markets" when rate fluctuations are really the result of input fuel price increases that can be exacerbated by regulatory or legislative decisions to artificially depress prices below market costs. In contrast, market mechanisms are robust in states like Texas and New York. In these states and others, retail choice did not result in the demise of social and economic goals relating to energy efficiency, renewable resource or hard-to-serve customers. Instead, new mechanisms have resulted in protection of all customers, programs to assist low-income consumers with payment assistance, robust energy efficiency and demand-response programs based on solid economics and verification standards, and dramatic investments in renewable energy resources. For example, there has been more wind turbine power production and associated capital investment in Texas than any other state and these trends continue. Texas has also adopted rules to ensure transmission investments to bring wind power to market.

2008 ABACCUS Rankings, Assessments and Recommendations

A hallmark of the ABACCUS analysis and report is the breadth of issues explored. The ABACCUS rankings and recommendations address design issues that are directly related to the ABACCUS methodology topics: 1) retail market status, 2) wholesale market competition, 3) default or standard service design, and 4) facilitation of the choice of retailer. This comprehensive assessment methodology was developed through a collaborative effort among retailers and representatives from eight state regulatory commissions. The ABACCUS methodology applied data regarding market structure and performance to score each state or province which results in a ranking. The following rankings are reported for the top performing jurisdictions:

The reports also present recommendations based on public policy choices that support the application of competitive forces. Chief among these is the design of default service. A poorly designed default service program can undermine retail competition because it attempts to provide services that a market can provide, and therefore creates greater barriers to entry for competitive entities that are better suited to meet unique customer needs. There are a number of actions that a state can take to reduce the impediments of default service to competitive retail markets. Key among these is the movement of default service to a more market-reflective rate in the near term. Short-term prices are more efficient, exclude the premiums associated with long-term fixed prices, and allow consumers to better respond to price changes. For consumers who desire a longer-term, fixed-price product, competitive retailers are offering such products.

The ERRC believes that the ABACCUS provides a baseline from which to build a properly functioning competitive energy market. For more information, please contact Nat Treadway at (713) 729-6244. Copies of the reports are available at no charge through www.defgllc.com.

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