Not long after my tenure as secretary of the U.S. Department of Energy, Maryland lawmakers took the progressive step of introducing competition to the electric utility sector, and today the state's energy marketplace has matured into one of the most successful in the nation. Innovation has replaced the inefficiencies of the old monopoly system, giving customers new choices, competitive prices and an efficient, reliable power supply.
Consider these recent developments:
•Since 2007, more than 1,700 megawatts of generation have come on line in Maryland in the form of upgrades at existing plants and delayed or withdrawn plant retirements. That's the equivalent output of a large nuclear power plant at a fraction of the cost.
•In the same time frame, more than 1,760 megawatts of demand response and energy efficiency capacity have been added. These programs reward residential and commercial users for reducing electricity demand during peak periods, such as on a hot summer day. In addition, they reduce the need for costly new power plants and avoid the emissions they create.
•Maryland's first wind energy farm just began operation in Garrett County, producing enough emissions-free energy for about 23,000 homes.
•Plans are advancing for a 17-megawatt solar facility in Frederick County that will be among the nation's largest.
•The state's largest coal plant, in Anne Arundel County, is now one of the cleanest of its kind in the nation thanks to a $1 billion scrubber project.
•PJM Interconnection, the regional power grid operator, has authorized a series of investments in new transmission lines that will allow states with excess generation to transmit their surplus power to areas where it's most needed, including Maryland. None of those plants were paid for by Maryland consumers, but the state's consumers will benefit tremendously.
•Residential customers are also benefiting from declining energy commodity costs, which have resulted in lower wholesale energy prices. At the retail level, about 200,000 residential customers of the state's largest utility now get their energy from an alternative supplier — often at a significantly lower price. Among the state's largest commercial and industrial customers, more than 90 percent are shopping around.
The common thread running through these successes is that competition is driving innovation and investment across the state. And in a sharp contrast to the old model, the costs for these projects have largely been borne by private-sector shareholders, not ratepayers captive to a monopoly utility.
Maryland's competitive market also helps facilitate consumer savings from smart grid programs, such as the one in development by BGE. Such initiatives will reduce utility operating costs, benefit reliability and pave the way for expanded demand response and efficiency programs.
In Maryland and beyond, independent organizations have endorsed competitive markets as a way to stimulate clean energy and reduce emissions. To name a few, the American Wind Energy Association stated that competitive markets are the best way to stimulate wind energy, while the Solar Energy Industries Association predicted the top four states in new solar jobs growth would be competitive-market states. In addition, the Environmental Defense Fund confirmed its support for market-based solutions to reduce greenhouse gas emissions, and the Center for American Progress identified nine competitive markets out of the top 10 states in energy efficiency measures.
Several leading industry indicators also confirm the success of clean energy technology in competitive markets. One major report ranked seven competitive-market states among the top 10 states leading smart grid implementation. Another ranked competitive markets as two of the top three in total installed wind capacity.
Despite these facts, some critics of competitive energy markets now want to return to the old, anti-competitive, monopolistic model — when the solution to rising demand was almost always to build new power plants and simply send the bill to customers.
Such a throwback would make participation in cheaper and greener solutions less attractive: essentially replacing low-cost demand response and efficiency programs with high-cost power plants. It would also have a chilling effect on private investment in energy infrastructure, placing more of the burden on utility ratepayers instead of private investors.
In addition, it would saddle consumers with the cost of power plants that may not be needed yet will take decades to pay for. PJM reported that its last auction for generation capacity resulted in enough committed power supply to meet projected demand, while providing a reserve margin of more than 20 percent.
It makes no economic sense to require that utility customers guarantee a profit for unneeded new power plants. Maryland already has enough power to meet demand and maintain more than adequate reserves. State officials must consider the impact these unnecessary costs would have on energy prices, jobs and the economy.
Participants in the competitive market have demonstrated that they are capable and willing to invest in cost-effective and green solutions to Maryland's energy needs. Consumers and businesses have demonstrated that they value having the option to choose their energy supplier.
It's incumbent on Maryland policymakers to remember the benefits of competition and prevent a step backward that would harm consumers and the economy.
Federico Pena, the former secretary of the departments of Energy (1997-98) and Transportation (1993-97) is co-chairman of the COMPETE Coalition, an organization of energy stakeholders including large power generators, large retail power consumers and energy efficiency/smart grid groups.