Maryland’s Dysfunctional Residential Third-Party Energy Supply Market: An Assessment of Costs and Policies
By Laurel Peltier and Arjun Makhijani, Ph.D.
Maryland’s Electric Customer Choice and Competition Act of 1999 opened the door to electric retail competition and allowed a variety of third-party supply companies to sell electricity supply and other services to Maryland’s consumers. The regulated utilities continue to provide distribution service to all customers, and they supply service to those customers who do not want to purchase it from competitive suppliers. The idea was that a deregulated energy market would provide consumers with choices, spark competition, and“provide economic benefits to all customerclasses.”2 This report examines whether retail competition has benefited residential consumers, especially low-income households. Gas retail competition also is available, subject to the same licensing and consumer protection rules that apply to electric retail competition.
For a variety of reasons, the marketplace for nonregulated suppliers was slow to grow until 2010. The impact, however, during that year was positive: Residential consumers who purchased from non-utility (“third-party”) suppliers saved in total about $20 million, as compared to regulated utility supply prices. Between 2011 and 2013, consumers who switched to third-party suppliers came out about even on the whole.
But from 2014 to 2017, Maryland households have been paying tens of millions of dollars more per year in aggregate to third-party electricity suppliers—about $255 million more in all than if they had stayed with their utility’s supply offer. This adverse outcome for consumers, despite a large number of suppliers, indicates that Maryland’s third-party supply residential market has become dysfunctional; in its current state, it is no longer fulfilling the purpose of the law—to benefit all consumer classes.