Ohio’s retail choice electricity market – which allows consumers to choose their electric generation service provider – has mainly offered cost-increasing options for residential consumers.
Research has shown that 72% of the most popular retail electricity offers in the past decade have been significantly higher than the default price consumers would pay if they didn’t explore other options.
The findings indicate ongoing market failures in the deregulated market.
While the study was conducted in Ohio, its implications are relevant across the United States and internationally in similar retail choice market settings.
“The issues we have identified are not exclusive to Ohio but are present in other states, Canada, and Australia as well,” stated the researcher.
Building the most extensive and detailed database of retail electricity offers, the study analyzed over 2 million records of offers made to Ohio consumers over a nine-year period.
Consumers who do not shop for retail electricity generation service default to their utility’s service, while those who choose to shop can pick from various competing supply offers.
Consumers face an overwhelming number of choices with around 90 to 150 different supply offers filed daily by approximately 45 suppliers with the state’s Public Utilities Commission.
The study revealed that for the most sought-after rate by residential customers, competing electric companies offered rates above the standard offer majority of the time.
Competing companies historically provided offers averaging 25% to 30% above the standard offer, with minimal cost savings below the standard offer.
Despite buying from the same wholesale markets, retail prices are set based on the standard price, which is already marked up significantly.
Moreover, the study found that the best prices were not consistently available to consumers throughout the year.
Future studies will delve deeper into the challenges consumers face in shopping for retail electricity, aiming for more efficient markets and enhanced transparency without reverting to a regulated system.
Suggestions include establishing an Office of the Independent Market Monitor and implementing a “supplier scorecard” to help consumers navigate complex markets.
The study received support from the Alfred P. Sloan Foundation.
Other co-authors of the study include researchers from Ohio State University, Lehigh University, and Welch and Associates Consulting.
