A retail power industry in need of reform comes to the table
By Steve Daniels, Crain’s Chicago Business, November 3, 2017
Is the retail electric supply industry ready for reform?
Recently completed state rules compelling power retailers to be more transparent with their sales pitches left consumer advocates underwhelmed. They plan to press the Legislature next year for far tougher provisions, aimed at ensuring that consumers know what they’re buying when they sign with competitors to Commonwealth Edison or Ameren Illinois and that they don’t get unwittingly caught paying double or more what they should to keep the lights on.
In the year that ended in May, northern Illinois households that bought electricity from unregulated suppliers paid $152 million more in the aggregate than they would have if they’d just stuck with ComEd, according to the Illinois Commerce Commission.
“The gaps in the rules reflect the continued need to increase and strengthen disclosures for consumers to make informed decisions about their electric service,” a spokeswoman for Illinois Attorney General Lisa Madigan says in an email. “There’s more work to be done.”
After fiercely contesting similar efforts in past legislative sessions, the industry is taking a more conciliatory tack. Kevin Wright, president of the Illinois Competitive Energy Association, says he hopes to hash out legislation with Madigan’s office and the Citizens Utility Board next year.
“We’re very much willing to engage in those conversations as long as it’s not a back-door attempt to re-regulate the residential market,” Wright says.
The ICC on Oct. 19 finalized rules three years in the making that establish a uniform set of disclosures suppliers must provide consumers when signing them up. They also require firms to record inbound sales calls, which helps in resolving later disputes between consumers and suppliers.
But the industry beat back attempts to require the posting of utility prices in company offers so that consumers know whether they’re saving or not. It also convinced a panel of state lawmakers to insist on removing provisions that would have forced suppliers to notify customers via phone when their fixed-rate contracts expire and they move automatically to variable rates.
Frequently when that happens consumers see their prices shoot up. Often it takes months or even years for those not paying close attention to their bills to notice they’re paying too much.
Jenny Bowman, a single mother in Rockford, was one of those unfortunate people. She lives paycheck to paycheck and pays her electric bill every other month to make ends meet. After getting a series of disconnection notices, she called ComEd and learned to her surprise that she was a customer of a company she’d never heard of called Green Mountain Energy.
Bowman says she never signed a contract with Green Mountain, a unit of Princeton, N.J.-based NRG Energy. When the firm presented her with the document, she said that wasn’t her signature. In the meantime, she’d been charged roughly twice what she would have paid with ComEd for at least two years—paying by her account nearly $1,700 too much.
When she complained, the company offered her a “one-time courtesy credit” of about $420. She took the rare step last month of filing a formal complaint with the ICC.
“If it was me who stole the information and used it, I would be in trouble. I’d be in jail or something,” she says in an interview. “I’m just tired of people taking advantage of people.”
In an email, a Green Mountain spokeswoman says the company “is proud to offer Illinois residents the choice of powering their homes and businesses with 100 percent renewable energy, an option the local utility doesn’t provide. We value our customers and take all complaints seriously. When we discover something irregular might have occurred, we work diligently to make it right with the customer. As an active legal matter, we can’t provide further information at this time.”
Key to meaningful reform would be a requirement that suppliers provide the utility price comparison on all offers, says David Kolata, executive director of the Chicago-based Citizens Utility Board. In the new ICC rules, suppliers have to provide that information only if they’re explicitly claiming savings—an easy requirement to get around.
Another important reform would be to bar retailers from charging above-market prices for customers getting bill assistance from the utility or the government. The state House passed a bill to do that earlier this year, but it died in the Senate amid industry opposition. Currently, companies can and do put such customers on plans that are higher-priced than the utility’s.
More ability to yank the licenses of suppliers that are consistently the target of consumer complaints also could be part of a reform package.
Wright says little will be off the table. “I think it’s fair to say there have been some lessons learned. We’re not here to defend the entire industry.”
He wants the focus to be on removing “bad actors” from the market. They tar an industry that by and large is offering value, he says.
Aside from the bad actors whose business models are predicated on shifting consumers from fixed-price deals into high-priced month-to-month arrangements without their knowledge, even the leading firms routinely charge more than the standard utility rate. That they’ve convinced 1 in 5 households in northern Illinois to sign with them despite that reality shows the issues go beyond “bad actors.”
State Sen. Don Harmon, D-Oak Park, who co-chairs the legislative oversight panel that weakened the ICC rules, has been an ally of the industry but also is viewed as a friend by the pro-consumer side. “I think it makes sense to start with the most egregious and work our way in,” he says.
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