State crackdown on energy suppliers on verge of becoming law

By Steve Daniels, Crain’s Chicago Business. May 28, 2019

With overwhelming evidence that the competitive market isn’t benefiting households, Illinois is on the brink of enacting the first meaningful reform of the retail energy supply industry since opening the residential market to competition nearly a decade ago.

Illinois Attorney General Kwame Raoul has struck a deal with Exelon, the largest retail supplier in the state, on legislation that would halt many of the misleading marketing practices that have enabled energy firms to lure customers away from Commonwealth Edison and then charge them considerably more than they would have paid the utility.

The state Senate easily passed the bill early this month over the objections of the industry, but it got hung up in the House. House Democratic leaders wanted Raoul to negotiate something acceptable to the largest players in the business. And that principally meant Exelon, one of the most politically potent companies in the state and by far the dominant player in the industry as the owner of ComEd and the largest Illinois power generator.

What emerged from the negotiation is a bill aimed squarely at stopping the frequent practice of luring customers through low teaser rates in place for a few months and then changing those prices each month and raising them well above the utility’s with no explanation as to why they’re fluctuating. Suppliers signing consumers to those types of deals won’t be allowed under law to renew the contracts unless the get their customers’ express consent.

The business model many firms employ now relies on their customers not noticing they’re paying too much until months or even years go by. That’s led the more than 1 million households buying from retail suppliers to collectively pay more than $100 million above what they would have with ComEd in each of the past two years, according to the Illinois Commerce Commission.

The concession Exelon won was that contracts with fixed prices would be allowed to renew without the customer’s express consent if the prices remained fixed for the duration of the new contract. The previous version would have required suppliers to gain a thumbs-up from each customer before renewing a contract or they would be returned to the utility. Many consumers ignore the required notifications by mail or phone when their contracts expire and prices change.

Another major player in the residential market, Houston-based Direct Energy, had argued that not allowing any automatic renewal would effectively kill residential competition in Illinois.

Even in cases where contracts are automatically renewed to fixed prices, consumers would be allowed to exit the deals with no exit fees or financial penalties.

In a sign the bill is likely to move quickly through the House, Republican Leader Jim Durkin, R-Western Springs, became a co-sponsor late last week, along with several other key Republicans.

“We believe the (bill) reflects the attorney general’s priority of protecting consumers at every stage—from the time a marketer shows up at their door to when they want to get out of a bad contract,” a spokeswoman for Raoul said in an email.

“Attorney General Raoul deserves a lot of credit here,” said David Kolata, executive director of the Citizens Utility Board, which backs the reform effort. “We think the outcome is very good. This is a very substantive reform and will move the ball forward in reforming an industry that’s been a problem for years.”

An Exelon spokeswoman confirmed the company endorses the compromise.