Power suppliers could soon be knocking on your door again. Here’s why.
By Steve Daniels, Crain’s Chicago Business, Oct. 16, 2020
The door-knockers appear set to return.
Since the onset of COVID-19, state utility regulators have barred energy suppliers from going door to door to sell households on alternatives to Commonwealth Edison, Peoples Gas and Nicor Gas. With much of modern-day unsolicited marketing occurring over cellphones or internet, power and natural gas retailers are among the last businesses to continue in the tradition of encyclopedias or vacuum cleaners.
In recent months, the industry has pressed to be allowed to resume in-person marketing in a limited way. But on Sept. 29 they received a gift that went well beyond even their scaled-back ambitions. Seemingly out of the blue, staff of the Illinois Commerce Commission moved to allow unsolicited door-knocking, arguing that Gov. J.B. Pritzker’s “Phase 4” public-health restrictions for Illinois didn’t allow the commission to continue to bar such marketing.
Until then, no supplier had publicly argued for that stance before the commission. Instead, suppliers generally had asked for permission to meet in person with potential customers if arranged ahead of time, presumably over the phone.
Now, however, the suppliers are all for resuming in-person sales. “Competitive energy suppliers should not be treated differently than any other industry that is permitted to sell products in-person under the Phase 4 DCEO guidelines and that complies with masking, social distancing, and other public health requirements,” emails Kevin Wright, president of the Illinois Competitive Energy Association, which represents suppliers.
The numbers tell the story. The number of Chicago households buying natural gas from a firm other than Peoples Gas dropped 32 percent just in the first nine months of 2020, to 56,526 from 82,913 in December, according to filings with the ICC. Likewise, at just over 1 million in August, the number of households getting electricity from a supplier other than ComEd is at its lowest level since 2012.
Buying gas and power from a nonutility firm generally costs more—often far more—than simply continuing to get it from the utility, which by law passes the costs onto ratepayers at no markup. The attorney general, which is the state’s chief consumer advocate, has identified door-to-door sales pitches as frequently misleading. Consumers often believe they’re saving money when they aren’t.
In an Oct. 2 filing with the ICC, Illinois Attorney General Kwame Raoul’s office, along with consumer advocate Citizens Utility Board, called on the commission to continue the suspension of in-person marketing. “This is not the time to threaten health through direct transmission or to allow potentially predatory in-person marketing for energy products almost certain to cost consumers more than the regulated utility,” the filing said.
The commission is expected to act on the staff’s motion within the coming weeks.
The staff in its motion said it “became aware” on Sept. 16 that the state’s Department of Commerce & Economic Opportunity “had begun to interpret its own guidelines to allow in-person solicitations provided that solicitors wear masks and proper social distancing is maintained, although DCEO had not published such guidance. Staff immediately contacted DCEO and confirmed this.”
The governor backs that up. “As the state has moved to phase four, the public health guidelines have largely focused on creating a new normal as we continue to live with this virus,” Pritzker spokeswoman Jordan Abudayyeh says in an email. “As the public health guidance requires, face-to-face interaction should only be conducted with face coverings and appropriate distance.”
The industry’s market share erosion during the COVID restrictions shows how critical door-knockers are to its success, as well as its struggles to retain customers.
For example, Houston-based Spark Energy, traditionally one of the heaviest employers in the market of door-knockers and the source of more customer complaints than any other supplier, saw its customer count in the four-state Midwest region, including Illinois, drop 23 percent to 76,000 from 99,000 from Dec. 31 to June 30, according to Securities & Exchange Commission filings. CEO Keith Maxwell attributed some of that loss to the suspension of in-person marketing.
“But we have taken this time to reassess our sales strategies, so that we can hit the ground running once they are able to ramp back up,” he said on Spark’s Aug. 5 earnings call.
Constellation, the retail energy supply unit of ComEd parent Exelon, previously employed marketers going door to door. The largest supplier both nationally and in the region, Constellation says now, “In December 2019, independent of the ICC moratorium, we made the decision to cease residential door-to-door sales and have no plans to resume those activities.”
A state law to reform the marketing and contract practices of suppliers went into effect at the beginning of the year. That so-called HEAT act cracked down on the previous practices of luring customers with low-cost rates for a brief period and then dramatically increasing those costs once the teaser expired.
Even so, customers of outside suppliers in ComEd’s territory paid a record 26 percent premium on average for electricity, an amount that collectively totaled $145 million in the year that ended May 31, according to the ICC. The commission doesn’t tabulate how much households taking gas from nonutility players collectively overpay. But the vast majority pay well above the utility’s gas charge, which fluctuates each month.
Read a full version of the Crain’s Chicago Business story.