R Street Scorecard Ranks All 50 States on Electric Competition Policies

The R Street Institute has ranked the states on their embrace of policies related to competition, which includes retail power markets, RTO membership, smart metering policies and friendliness to distributed resources.

The scorecard gives the best grade to Texas, with most customers in ERCOT’s territory shopping for their electricity providers, but even it was left at an “A-” because the retail market does not extend to municipal utilities, co-ops or the utilities outside the grid operator’s territory.

On the other end of the scale is unranked Nebraska, where consumers are completely served by public utilities and the report’s authors lacked access to data to give it a ranking. Alabama was given the lowest grade — the only “F” — as no real competition exists at any level. It also scored low on other metrics like smart meter data and consumer engagement.

“What we want to accomplish with the release of this report and the scorecard is to help policymakers at the state level better understand what are the policy opportunities and what are some of the challenges in given jurisdictions regarding the enablement of more competitive practices in a given jurisdiction,” Chris Villarreal, R Street associate fellow and report co-author, said during a webinar presenting the report Sept. 30.

The report explains every state’s grade, including areas where they can improve, which is possible for even the best-ranked states, Villarreal said.

Other highly ranked states are retail restructured jurisdictions in the Northeast and Midwest, with D.C., Illinois, Ohio and Pennsylvania all getting a “B+.” Delaware, Maine and Rhode Island each received a “B,” and Massachusetts, New Hampshire and New Jersey a “B-.”

The “C” states include a mix of retail restructured states, including some like Maryland or New York that would have ranked higher in years past but have fallen because of policy changes. Maryland recently shut down its retail market for residential consumers, while New York has for years capped retail prices based on a backward-looking, 12-month rolling average of utility rates.

One issue with Maryland is that while the Public Service Commission has started to more actively police bad actors in the retail market in recent years, for a long time it took a light approach to ensuring the market ran fairly, which is one of the metrics the report card uses to rank restructured states, R Street Senior Fellow Kent Chandler said in the webinar.

“Maybe it was too little too late … holding some of those bad actors accountable really did contribute to the ultimate public policy shift there in the legislature,” he added.

NRG Energy Vice President of Regulatory Affairs Travis Kavulla agreed with that assessment. (His company serves about 8 million customers in competitive markets around the country, and as a Maryland resident, he has a grandfathered long-term contract from the market.)

Another issue is that the more successful states try to keep their consumers actively informed, such as by requiring multiple notices that a long-term, fixed contract is expiring and customers need to pick another option or they could automatically be shifted to a provider of last resort with more volatile prices, Kavulla said. Some other state commissions, like Pennsylvania’s, issue notices to consumers that utility rates are about to go up and consumers can shop for a better deal.

“So now, ironically, basically all residential customers in Maryland, except for people like me, who have grandfathered long-term contracts, are basically strapped to the roller coaster of volatile wholesale energy market pricing, which interestingly, is giving Maryland legislators heartburn that they could have prevented by encouraging more active shopping and more long-term contracting,” Kavulla said.

Other states with mixed grades do not have any experience with retail markets, but they have taken moves to join an RTO like some western states, or they have very good policies around distributed energy resources, such as Hawaii.

Just before the report was finalized, Utah was about to join Alabama at the bottom of the pack, but its legislature passed Senate Bill 132, which allows more competitive options for large loads, noted Josh Smith, energy policy lead for the Abundance Institute. The law shifts the uncertainties around the future of large loads from data centers looking around for quick and affordable access to the grid away by calling multiple utilities for one site from captive ratepayers.

“There’s this kind of uncertainty that ratepayers should not be on the hook for,” Smith said. “Instead, that should be something that Google or Meta, or anyone else can check up with a company. … There are lots of these guys who can provide that. And that’s the first step that Utah took … in addition to enabling some very niche, I think, but exciting private grid options within the legislation.”