Some Therapy For Electric Bill Shock
TRUE STORY. Three times, Elliot Becker of Escondido, Calif., leapt at the chance to choose a new electric company. Like many Californians, he hoped he could benefit from lower--or at least stable--rates when the state allowed electric companies to compete in 2000. The first company dropped Becker because of a computer error that was never fully explained. The second backed out of doing business in California before his service began. Undeterred, Becker in January 2001 chose Green Mountain Energy--which announced early this year that it, too, would exit the residential power business in the Golden State. Not only has Becker been forced back to his old utility, San Diego Gas & Electric, but he is being hit with the same surcharges that all California residents now pay because of the costs the state incurred to clean up the mess caused by energy deregulation. "There is no more choice," Becker laments, "and consumers in California are now left with the worst of all possible worlds."
WHAT'S UP. California is by no means the only state where the movement to provide consumers with an energy choice has run into trouble. In most of the 24 states that have attempted deregulation, competitors either have not emerged or have bowed out of the difficult business of fighting entrenched utilities. Ohio, for instance, certified 38 new electricity suppliers when it opened its market to competition in 2001, but only one is actively marketing to households, and that service is offered only in one city. In Maryland, thousands of consumers who thought they had locked into long-term, fixed-price natural gas contracts with alternative companies were stunned this spring when, one by one, the firms backed out of the deals and sent them back to their old gas utilities--and higher prices.
"We have screwed it up royally," says Ken Malloy, chief executive officer of the Center for the Advancement of Energy Markets, a pro-competition think tank. To ease the transition to a competitive marketplace, state legislators allowed utilities to temporarily keep charging their old customers certain extra fees to cover long-ago investments in power lines and nuclear power plants. The trade-off for consumers was that electricity rates were capped for that period at artificially low levels, which made it impossible for many alternative providers to make money.
BATTLE PLAN. Some states allow communities to band together to negotiate deals with alternative energy providers still serving residential consumers. For example, the 112 communities in the Northeast Ohio Public Energy Council recently signed a two-year deal with Green Mountain Energy at 6 percent below the current utility rate.
Consumers who are on their own should be prepared to ask lots of questions of alternative energy companies. Is the company licensed by the state? Fly-by-night businesses could take your money and run. Does the contract require a long-term commitment and impose early termination fees? You won't be able to jump ship easily if better rates become available elsewhere. At the same time, authorities can do little to stop companies from backing out of these contracts if business becomes unprofitable.
To avoid being "slammed," or switched to a new service provider before you are ready, don't ever give out your electric utility account number until you've decided to make the switch. "Treat it like your Social Security number," advises Robert Tongren, a public advocate who is Ohio consumers' counsel.
BONUS TIP. The grim picture on energy choice doesn't mean consumers have no control over energy bills. The savings that a homeowner can reap by weatherizing and installing energy- efficient appliances far outstrip any offers currently being peddled by energy suppliers. (Information on where to start can be found at the Web site for the federal government's Energy Star program, http://www.energystar.gov, or from the nonprofit Alliance to Save Energy, http://www.ase.org.) On the most basic level, a 23-watt compact fluorescent light bulb burns up 76 percent less in electricity costs than a 100-watt standard light bulb. -Marianne Lavelle
This story appears in the August 18, 2003 print edition of U.S. News & World Report.
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