Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC staff addresses competitive effects of New York energy reform, (Sep 17, 2015)

By Greg Hammond, J.D.

FTC staff for the Office of the General Counsel, Office of Policy Planning, and Bureau of Economics has commented on a New York Public Service Commission (NY PSC) white paper, entitled “Benefit-Cost Analysis in the Reforming Energy Vision Proceeding” (Staff BCA), recommending that the analysis consider additional effects on competition, beyond cost and price.

The Reforming Energy Vision (REV) is an effort to open the marketplace to distributed energy resources at the distribution level of the electric power industry, according to the FTC staff. As part of its efforts, the NY PSC has set forth a Benefit-Cost Analysis framework that would be applied in examining categories of distribution utility expenditures with regard to developing the Distributed System Platform, the procurement of distributed energy resources via selective processes, the development of customers’ and third parties’ efficient investment in distributed energy resources, and energy efficiency programs.

The Staff BCA, however, seems to focus mostly on potential cost and price benefits, such as opportunities for quality improvements, wider customer choice, and increased rates of innovation, FTC staff observed.

“In our view, the NY PSC and the public would benefit from broadening the perspective of the Staff BCA,” FTC staff wrote. “By focusing on a more complete range of potential economic performance benefits likely to flow from the growing competitive role of [distributed energy resources], the NY PSC can illuminate additional opportunities to benefit customers.”

Specifically, FTC staff recommends that the NY PSC add a category of benefits associated with the increased value of electric services that distributed energy resources provide to customers, incorporating the principles of competition, efficiency, and customer choice. “Chief among these benefits could be the extra value that customers of retail electric services derive from the increased customization of those services,” the comments stated. Further, because increased competition in formerly regulated monopoly markets could also induce efficiency improvements and more rapid innovation, FTC staff recommends the addition of “Efficiency Improvements” and “Increased Innovation” to the list of benefits.

Alternative future conditions of interest could include changes in relative fuel prices, climate change impacts, and the pace of technological changes that would affect the supply and demand sides of the market, FTC staff suggested. “If the BCA results, based on the most likely future conditions, prove sensitive to alternative future conditions—or to rates of change in future conditions—then additional benefits may be associated with the customization of services and the increased rates of innovation that stem from increased competition.”

News: Antitrust FederalTradeCommissionNews