I was recently honored with the Kent Wheatland Memorial Award, which recognizes professional accomplishments in the space nearest and dearest to my work at NRG: introducing and improving competition in the energy markets. You can read my acceptance speech here. I would also like to take a moment to reflect on why this work matters.
Here at NRG, the Regulatory Affairs team is guided by the fundamental belief that markets should create space for competition in the electricity sector. Unlike other industries, energy is often dominated by monopolies, meaning consumers have limited choices in their energy supplier. We believe consumers should have options, and suppliers should be allowed to compete fairly for their business.
Now, it is essential to understand that we are not in an "unregulated" or "deregulated" market. In every area we serve, the sale of electricity and gas is regulated by a state or federal commission responsible for decisions regarding licensing, customer protection, and market power. Regulation plays a significant role, whether in a restructured industry or a monopoly driven one. The key differences in regulation between the two markets can be boiled down to two main points.
In a monopoly, regulators and the monopolies engage in a kind of "Mother May I?" game, where monopolies seek approval for various investments. This system often leads to more profits for every dollar invested. In contrast, in a competitive environment, regulators focus on assessing market competitiveness, ease of shopping between alternative firms, and the fairness and efficiency of the relationships between competitive suppliers and the utility that remains responsible for the infrastructure.
Another crucial difference is the role of the customer. In a monopoly, there is only one provider, and you cannot choose to switch. Only the regulatory commissions can change that - even in cases of serious misconduct by monopolies. The regulatory commission becomes, in effect, the monopoly’s singular customer. Sometimes, this relationship is dressed up by the monopoly’s advocates in positive sounding terms, referring to the arrangement as a “regulatory compact.” In reality, this system limits everything from the extent of innovation we may expect from monopolies to the level of financial accountability that such utilities face.
In a competitive market, the real customer—the one paying the energy bill—has the power to hire and fire a provider or choose from various products. This drives innovation and holds companies accountable for their performance without passing the cost of failures onto consumers.
So, why do we have a Regulatory Affairs team if the industry is considered deregulated? It is because competition isn’t deregulation. Instead, the introduction of competition is itself a piece of regulatory policy that is intended to empower consumers by giving them energy choice and encouraging providers to compete fairly.
There are many details to this process, and my team and I are continually involved. I invite you to explore our major regulatory comments, policy papers, and other viewpoints at www.nrg.com/energy-policy.html to learn more.
