IN NORTHEASTERN STATES, ENERGY CHOICE UNDER ATTACK AS ELECTRICITY RETAILERS GET RESTRICTED
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- Feb 14, 2020 8:23 pm GMT
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Much of the attention in the realm of energy choice recently has been in the southern United States, with the Energy Freedom Act in the Carolinas, the Florida Supreme Court striking down the energy choice ballot initiative, and the Virginia Energy Reform Act. But as 2020 comes into full swing it has become clear that the Northeast is an integral battleground.
In the past, northeastern states have been great examples of the benefits of energy choice and the successful implementation of such programs. But those who want to restrict energy choice are fighting in these states to take away the freedom of energy choice.
In Massachusetts, energy choice advocates are being opposed by the state Attorney General Maura Healey, who has accused competitive power retailers of overcharging customers. With this claim as the stated motivation, Healey has called for the Bay State to end their foray into electric retail competition.
In an op-ed for Commonwealth Magazine, the Attorney General claims that customers in Massachusetts have been deceived by the retailers they switched to, experienced underhanded tactics to promote switching from their utility, and therefore have ended up paying millions more in power bills in than if they hadn’t switched. She goes on to say:
“As the state’s ratepayer advocate, it’s my job to protect consumers from the unfair and deceptive practices of misleading and predatory businesses, and that often requires extensive investigations.”
Massachusetts is indeed one of the national leaders in the total number of residents who chose a new electricity supplier, reaching 39% of total residential customers in 2018. And it’s true, the U.S. Energy Information Administration (EIA) has noted that residential customers in Massachusetts that have chosen their own provider paid 1.6 cents per kilowatt-hour (kWh) more than those with the default provider, but it is important to note that the price difference doesn’t tell the full story.
For one, surveys have consistently shown that many residential customers are willing to pay slightly more for power if it allows them to choose energy suppliers with a higher percentage of renewable energy. As an example, a Yale study found that Americans were willing to pay an average of $16.25 per month more to get power from 100% renewable sources.
Further, many competitive customer choice programs provide other offerings that are appealing to customers. These offerings include prepaid plans that allow for electricity to be budgeted more clearly, variable pricing plans that allow customers to shift their power use based on changing rates, and more. Customers can take advantage of these pricing plans or not, but to remove that choice from customers under the pretense of protecting the intelligent citizens of Massachusetts is the real misleading practice at play.
Just a bit further north, customers in Maine are watching a bill be debated by state lawmakers that also threatens to take away competitive energy suppliers under the guise of protecting the consumers. The state’s Office of the Public Advocate is encouraging the adoption of a law that would require all residential customers to use the single standard offer rate negotiated by the state, rather than seeking out the energy retailer that the customer decides has the best price and service.
As in Massachusetts, those pushing this change in Maine are citing an increase in utility bills compared with what they would have paid via the single standard offer. In supporting this measure, State Representative Seth Berry, chair of the legislature’s energy committee, noted that:
“Theoretically, competitive suppliers help to bring down prices for everyone, but what we’ve found is the bulk purchasing power of the PUC is most helpful in keeping costs down for everyone.”
The same EIA data cited above finds that the 13% of Maine residential customers who have opted for customer choice programs have ended up paying 1.9 cents per kWh more than the default price, but once again that raw number is only looking at one aspect of the market and thus only one reason that customers may change providers. The presence of a competitor forces innovation by the default utility and other competitive retailers that arise, both to advance clean and affordable energy technology as well as custom-tailored programs that benefit the customers in the ways that matter most to them.
Indeed, as the national spokesperson for the Retail Energy Supply Association noted, “no one else is running a customer education campaign explaining how this market works, or what the products are. It’s all fallen to competitive suppliers to do that and face to face is the most effective way to communicate that.”
So while those looking for a reason to do away with energy choice have falsely claimed that these ways of selling the product are an avenue of deceit, retail energy suppliers are finding that the only way to get the real information to customers is through personal education efforts. And unsurprisingly, when customers hear the truth about retail energy and see the benefits specific programs can offer them, that is when they switch. Maine’s efforts to restrict these in-person interactions are just another example of putting a stranglehold on all providers except the default utility.
While Massachusetts and Maine are considering actions to do away with energy choice altogether, New York lawmakers are continuing to increase the restrictions placed on retail energy providers until it suffocates the market entirely, essentially removing the choice from the consumers. Specifically, New York has instituted a price cap and other limits under the PSC Reset Order.
The PSC Reset Order, known officially as the “Order Resetting Retail Energy Markets and Establishing Further Process,” artificially limits the products that retail energy providers are permitted to offer. Specifically, the reset order denotes that the only products they can provide to New York residents are:
A variable rate, commodity-only product that guarantees saving compared with the default provider;
A fixed rate product that is limited in price to a 12-month trailing average utility supply rate with a 5% adder; and
A renewable electric commodity that is at least 50% greater than the minimum renewable option of the default utility.
Once again, these limits are set artificially and are purposely intended to make it difficult for retail energy providers to provide customers with unique programs that will encourage them to opt-out of their default utility provider.
While Massachusetts and Maine are looking to outright eliminate energy choice, the Retail Energy Supply Association has characterized these types of moves coming from New York as “unprecedented action of effectively eliminating retail choice for residential and small commercial customers in New York by substituting the Commission’s judgment for that of consumers in determining what energy products offer value.”
In total, 16% of New York residents have found a program, a rate, a product, or some other offering of a retail power provider to be more desirable than what they were receiving from their default utility. Customers (both those who switch providers and those who stay) should continue to be able to weigh the pros and cons of each offer, but the reset order is suggesting that residents cannot make this choice on their own and should instead only be offered what the Commission thinks they should.
Tying it all together
A common thread runs through the attention recently given to northeastern states and their battle for energy choice. The opponents who want to keep the monopolistic status quo have found ways to hinder progress and have created a divide between electricity retailers and energy choice advocates. Both retailers and consumer groups want to see open competition and free consumer choice reign as the standard paradigm in the power sector, as it will benefit their respective stakeholders. But if these two groups are divided rather than finding common ground to take on the major influences who want to restrict competitive markets, then the energy choice movement will truly fail.