En­ergy com­pe­ti­tion led to higher Md. rates

Baltimore Sun - - COMMENTARY - By Paula M. Car­mody

Are Mary­land res­i­den­tial cus­tomers ben­e­fit­ing from lower prices as a re­sult of re­tail util­ity com­pe­ti­tion? Two re­cent re­ports in­di­cate the an­swer is “no.” The Of­fice of Peo­ple’s Coun­sel (OPC), which rep­re­sents the in­ter­ests of util­ity cus­tomers statewide, and the Abell Foun­da­tion have each pub­lished re­ports high­light­ing the higher gas and elec­tric prices that res­i­den­tial cus­tomers pay in con­trast to the reg­u­lated util­ity rates. The OPC re­port makes a pre­lim­i­nary find­ing, based on a com­par­i­son of ac­tual sup­plier price of­fers and util­ity sup­ply rates, that res­i­den­tial cus­tomers as a whole are pay­ing more for en­ergy sup­ply. This is con­sis­tent with the Abell Foun­da­tion re­port that re­lies on sup­plier data col­lected by the fed­eral gov­ern­ment.

The OPC re­port asks the ques­tion whether res­i­den­tial cus­tomers are pay­ing a higher unit price for elec­tric­ity and gas if they buy it from re­tail sup­pli­ers in­stead of their lo­cal util­ity. The pre­lim­i­nary data, shows the an­swer is “yes” for res­i­den­tial cus­tomers as a whole, a find­ing that’s in line with the ex­pe­ri­ence of at least one other state (Mas­sachusetts). This does not mean, and the OPC re­port does not state, that no sup­pli­ers of­fer lower prices, or that some sup­ply prices are not lower for cer­tain pe­ri­ods of time (for ex­am­ple, teaser rates). But it does mean that, taken as a whole, the prom­ise of lower sup­plier prices — in com­par­i­son with util­ity sup­ply prices — has not been de­liv­ered for res­i­den­tial cus­tomers.

There are sev­eral hun­dred li­censed en­ergy sup­pli­ers in Mary­land ac­tively serv­ing res­i­den­tial cus­tomers and over 60 sup­pli­ers so­lic­it­ing res­i­den­tial cus­tomers at any one time. This may seem like a good in­di­ca­tor of true com­pet­i­tive ac­tiv­ity, driv­ing down prices for con­sumers. So why are so many house­holds pay­ing more for elec­tric­ity and es­pe­cially gas sup­ply than if they stayed with the reg­u­lated rates? Only a few sup­pli­ers ap­pear to have price of­fers lower than the util­ity rates. OPC’s monthly re­view of sup­plier price of­fers shows that most of­fers ex­ceed the util­ity rates, and this does not in­clude the im­pact of vari­able rates, which go up month to month but do not seem to come down.

Real world ex­pe­ri­ence makes clear that the re­tail sup­ply mar­ket op­er­ates very dif­fer­ently for res­i­den­tial cus­tomers (and I sus­pect, small “mom and pop” busi­nesses) in com­par­i­son to medium and large com­mer­cial and in­dus­trial en­ter­prises. Some res­i­den­tial re­tail sup­pli­ers rely pri­mar­ily on di­rect mail or on­line mar­ket­ing. How­ever, a num­ber of sup­pli­ers use door-to-door mar­ket­ing (which in­cludes tables set up in the mall, at the lo­cal Wal­mart or in front of en­ergy as­sis­tance of­fices) and “cold call” tele­phone so­lic­i­ta­tions. The Abell Foun­da­tion re­port pro­vides a clear pic­ture of the higher prices — and higher bills — that can flow from these mar­ket­ing tech­niques. The in­ves­ti­ga­tions in Mary­land and other states show that de­cep­tive mar­ket­ing prac­tices re­lated to these types of mar­ket­ing oc­cur fre­quently. In fact, con­sumers are now re­ceiv­ing phone calls with cloned util­ity num­bers of­fer­ing “dis­counts.” The real world ex­pe­ri­ences of those cus­tomers, dis­missed as the “re­sult of a few dis­rep­utable elec­tric­ity sup­pli­ers,” are very real and very harm­ful.

These higher prices for es­sen­tial elec­tric and gas ser­vices have an even greater im­pact on low-in­come house­holds. OPC re­leased an­other re­port in 2018 that an­a­lyzed de­tailed char­ac­ter­is­tics of low­in­come house­holds in Bal­ti­more City and each county. In Mary­land, the av­er­age an­nual en­ergy bur­den (per­cent­age of in­come spent on en­ergy) for low-in­come house­holds is 13 per­cent; the bur­den is 2 per­cent for non-low-in­come cus­tomers. Even with en­ergy as­sis­tance ben­e­fits, low-in­come house­holds on av­er­age still spend 9 per­cent (11 per­cent in Bal­ti­more City). Higher en­ergy sup­ply prices only ex­ac­er­bate the dif­fi­cul­ties in pay­ing en­ergy bills.

The two re­ports, and the data, are very strong in­di­ca­tions of a prob­lem here in Mary­land and in other re­tail com­pe­ti­tion states. So the ques­tion is: What do we do about it? OPC’s re­port of­fers sev­eral rec­om­men­da­tions: (1) col­lec­tion of ac­tual price data by the Pub­lic Ser­vice Com­mis­sion, so that there is no ar­gu­ment about the price com­par­isons; (2) greater price trans­parency for cus­tomers; (3) proac­tive in­ves­ti­ga­tions and en­force­ment of ex­ist­ing con­sumer pro­tec­tion rules by the Pub­lic Ser­vice Com­mis­sion, the agency that over­sees the re­tail sup­pli­ers; and (4) a re­assess­ment of the rules gov­ern­ing vari­able rates.

The Gen­eral Assem­bly passed the elec­tric re­struc­tur­ing law to in­tro­duce re­tail choice, but more im­por­tantly, to pro­vide “eco­nomic ben­e­fits to all cus­tomer classes.” After 18 years, I be­lieve that it is time to as­sess whether Mary­land house­holds are re­ceiv­ing those ben­e­fits — not in con­cept, but in re­al­ity.

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