Wholesale electricity rates in deregulated markets are expected to remain low in 2017–good news for customers, but a bad outlook for merchant power companies, according to a report by the New York bond rating agency Moody’s Investor Services.
Many states, including Texas, including Houston, have deregulated wholesale electricity, meaning supply and demand determine prices, as opposed to rates set by regulators. Many states, including Texas, also have deregulated retail markets in which customers can choose their electricity providers based on price and services offered the companies. Oregon and most states Northeast, have aspects of deregulated markets, where customers are allowed to chose their electricity or gas company, or both.
Abundant and cheap supplies of natural gas, which is burned to make electricity, means wholesale prices are likely to remain low, Moody’s said, meaning power smaller profits for power companies. Merchant power companies with fleets of more expensive coal and nuclear power plants are expected to struggle, according to the Moody’s report.
Moody’s expects rates for regulated utilities to remain stable, although the increasing adoption of solar and wind power by customers may require them to revamp their rate structures. Customers, who say install rooftop solar panels, cut into electricity sales, meaning utilities might need to seek higher rates from regulators to offset those losses, Moody’s said.
Recommended reading source: Fuel Fix