Buying power from an indie? You may be paying too much.
By Steve Daniels, Crain’s Chicago Business, July 15, 2017
More than 1 in 5 Chicago-area households are signed up to buy electricity from a company other than Commonwealth Edison, and many are paying too much to keep the lights on as a result.
A recent report about the state of the competitive retail power market here shows households getting power from outside suppliers collectively paid $152 million more than they would have if they had stuck with ComEd during the year that ended May 31. On average, that amounted to 1.5 cents more per kilowatt-hour, about 24 percent more than the power price ComEd customers paid during that period, according to the annual market survey released by the Illinois Commerce Commission’s Office of Retail Market Development
Overall, with the cost of both electricity and the delivery rates all households pay to ComEd regardless of where they get their power, those on competitive supply paid on average 12 percent more, or $113 annually.
That is by far the worst “savings” performance unregulated suppliers have posted in ComEd’s territory since the residential market effectively opened to competition in 2011.
Over the same period, strangely, the number of households in northern Illinois that contracted on their own with a supplier increased 17 percent to 759,825 from 651,570. That followed a year in which the figure had declined as residential customers suffered an aggregate loss on their power deals of $115 million.
Not surprisingly, customer complaints to the Illinois Commerce Commission have surged. In the year that ended March 31, there were 1,444 complaints about suppliers from households in ComEd’s territory, up 19 percent from 1,213 the year before.
The spike in complaints was notable in light of the fact that the overall number of household customers served by outside suppliers fell 13 percent to 1.24 million from 1.43 million. That’s because many municipalities that had contracted to buy power on behalf of their residents opted not to extend those pacts, sending those households back to ComEd.
The ICC report doesn’t attempt to divide low-income customers from others, so it’s unclear how much of the overpayment here is coming from the poor. The Citizens Utility Board, a Chicago-based consumer watchdog, gets complaints about electricity suppliers from households of all incomes, Executive Director David Kolata says.
Kolata would support a ban here on marketing to residents getting aid for their electric bills, as New York has done. “This is a market that’s not working for consumers,” he says. “Most of the offers we’re seeing are higher than ComEd’s price, and we’re not seeing the kind of innovative offers we’d like to see that would give consumers value beyond price.”
See CUB’s news release on the report.
Industry representatives argue that the inflated prices aren’t necessarily evidence of a dysfunctional market. “Unfortunately, the ICC report . . . ignores the millions of dollars in technology, energy efficiency, rebate and incentive products and services that customers have received from competitive supply service, which would materially reduce the report’s price differential between customers on competitive supply service and ComEd supply service,” emails Kevin Wright, president of the Illinois Competitive Energy Association, which represents suppliers.
Indeed, some offers come with inducements like gift cards, airline miles and smart thermostats. Others promise 100 percent green energy, meaning that the suppliers purchase special certificates from renewable power producers to offset the conventional power they procure on behalf of their customers.
It’s not at all clear, however, that most customers attracted to gift card-style incentives understand they’re paying well above ComEd’s price in return.
In the New York ruling, Supreme Court Judge Henry Zwack wrote that a regulator-appointed group examining marketing to low-income households rejected industry examples of value-added products like fixed-rate contracts, gift cards and free months. “What is clear,” he wrote, is that “despite the (regulators) affording (suppliers) ample opportunity to produce some evidence of ‘value added energy product’ that has simply not happened.”
Brien Sheahan, the ICC chairman appointed by Gov. Bruce Rauner, declines a request for an interview. But an ICC spokeswoman emails that state law requires the commission “to promote the development of an effectively competitive retail electricity market that operates efficiently and benefits all Illinois consumers.” “The commission is not charged with instituting price controls or interfering with the ebb and flow of prices in the retail electric market,” she writes.
The commission has approved rules requiring suppliers to be more transparent about their offers. However, the rules, still awaiting a legislative review, would mandate posting ComEd’s price alongside an offer only if the supplier is claiming savings. Otherwise, consumers still wouldn’t know.
As for the complaints piling up at the ICC, industry representative Wright says the bulk is aimed at relatively few of the 50 or so companies pitching area households. He calls for beefed up ICC enforcement of existing marketing rules.
Still, the industry’s market share leader in Illinois—Constellation Energy Group, the power marketing arm of ComEd parent Exelon—hasn’t been immune to rising complaints. The ICC collected 108 complaints against Constellation in the year that ended in March. That was up 71 percent from 63 the year before and knocked Constellation from the highest “complaint scorecard” rating of five stars to four stars.
A Constellation spokeswoman attributes the higher complaints to fallout from integrating billing systems from an acquisition. The 108 complaints were “less than half of 1 percent of the 330,000 Illinois residential customers we serve,” she says in an email.
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