News Analysis

 

Electric Shopping Credits: In Search of an Apples- to-Apples Comparison

 

Methods vary, notes one analyst, but are they barking up the wrong tree?

Those in the electric industry use all manner of methods to calculate the size of generation shopping credits-the figure (sometimes referred to as the "price to beat") that is supposed to represent the stand-alone price of the bare electricity commodity that customers might otherwise buy from a competitive supplier, rather than from their traditional utility.

Some compute the credit from the bottom up, adding the individual cost components of generation supply (should that include marketing expenses as well?), while others take the total traditional utility bill and try to back off the various costs, one by one, that don't have anything to do with generation.

Yet even when the resulting figure seems to fall way below the recognized spot market power price, as often occurs during the peak summer months, it can prove difficult for suppliers to convince regulators to increase the credit. Utilities also have been known to ask for a seasonally adjusted credit, to discourage customers from churning their accounts back and forth between utility and competitor.