Answer Man: Pros and cons of switching electric serviceNovember 8, 2011 —Q. What are the pros and cons of switching from one electric service provider (Ameren) to another (such as Direct Energy)? - J.D., of Belleville
By Roger Schlueter, Belleville News-Democrat
A. Opening your electric bill can be shocking enough. But wouldn't it really fry your mind if you took the trouble to change companies and then found your bill was even higher?
It can happen, warns the Citizens Utility Board (CUB), which has represented residential utility customers since 1984. But if you read the fine print and compare apples to apples, you might save yourself a few bucks each month.
Until last year, Ameren was pretty much the only game in town for homeowners like you. But last December, a decision by the Illinois Commerce Commission made it easier for other companies to supply electricity and bill their services through Ameren.
As a result, like you, I've received offers from Direct Energy, offering savings of up to 20 percent, a guaranteed price protection plan and a $50 Visa card to boot. So, such offers are a no-lose situation, right?
Maybe -- but maybe not, says CUB.
"While it's an interesting development in the electric market, long-term savings are not guaranteed," it says. "The jury is still out on whether residential competition is going to bring real value to consumers in the long run."
The most important thing, CUB says, is to make sure you compare Ameren's per kilowatt-hour (kwh) "price to compare," which includes the "electricity supply charge," the "transmission services charge" and a "supply cost adjustment."
As of last Wednesday, the Ameren cost is 6.368 cents per kwh from now through May. Direct Electric currently has a 12-month fixed rate guarantee of 5.34 cents per kwh, so right now you'd save a tad more than a penny per kwh. I used 336 kwhs last month so, theoretically, I could have save about $3.50.
Now for the fine print. If you use electricity as your primary source of heat, Ameren has what's called a "space-heat" rate -- 6.368 cents for the first 800 kwhs but then dropping to 2.516 cents for any usage above that. Direct has no comparable deal for "space-heat" customers, so eventually, you might wind up paying more.
More things to look for, according to CUB:
* Some companies ask that you sign up for a given period -- and charge you if you break that promise. Find out what that period and termination fee are. (Direct Electric says it currently has no such fee.)
* Find out if the company charges any monthly fees or is trying to sign you up for services beyond its advertised electricity prices.
* If you sign a contract guaranteeing you a given rate for a given time, make sure that contract doesn't have a clause allowing the company to weasel out of its promise.
* Determine whether the company requires a deposit.
* Ask if you're even eligible to sign up for the company's offer. BlueStar, for example, does not take those on the Low Income Home Energy Assistance Program (LIHEAP) and those on deferred pay plans.
* The market is new, but hopefully the company you choose won't suddenly go bankrupt and leave you in the dark.
And, here's the final potential con: The fine print on my letter says my savings are not guaranteed after May 2012, when Ameren goes back to summer pricing (their charge was only 5.646 cents per kwh last June through September). Might Ameren's prices go down next year? Will Direct go up after a year? That's a decision (and a gamble) you'll have to make.
Also, don't forget that you're saving money only on the supply of your electricity. Ameren still will bill you for the delivery -- and as you may know, they're fighting for a $40 million rate hike to deliver electricity. If that is approved, you'll pay it whether you switch suppliers or not.
One final note: On March 20, Belleville voters will choose whether to allow the city to engage in municipal electric aggregation -- a chance to bargain with electric suppliers for lower rates for residents. You then could choose to be included in this group purchase or opt out.
For all the details, go to www.citizensutilityboard.org, click on "electric" and print out its helpful fact sheets.