This is tantamount to awarding a large share of the retail market to the only seller customers have ever dealt with, at a price other retail competitors cannot match. It is not likely to lead to vigorous competition in the small-use commercial and residential markets. There are three principal components crucial to any default rate policy setting the right price while minimizing overall costs, deciding who should provide default service, and the developing relationship of default service to clean energy resources. This Issuesletter will discuss each of these. The concept of default service does not exist in ordinary competitive markets.
Every consumer buying any other product chooses a retail supplier.
There is no default provider of, for example, gasoline. Any consumer that buys gasoline chooses a retail supplier. Customers do not have the option of doing nothing and thereby having their cars filled by a default provider, at a wholesale price. Of course, electricity is not gasoline. Default service, sometimes called standard service or service of last resort, is designed to meet these market and political realities.