Electricity market brings choices, deals - and scams

November 3, 2013
The Baltimore Sun
Jamie Smith Hopkins

James Malaro Jr. bought electricity from a company other than his utility for the first time last fall. The deal quickly went bad.

The Centreville man hadn't realized it, but the money-saving rate he'd been quoted was variable, not fixed. It more than doubled during the winter.

As more customers and companies jump into Maryland's electricity-purchase market, reports of problems and outright scams are mounting. Maryland's Public Service Commission has seen a more than 50 percent spike in complaints about energy suppliers this year compared with all of last year, including so many about Starion Energy — the company that increased Malaro's rate — that it launched an investigation into the Connecticut firm.

But the options for getting a good deal on power are rising, too. Malaro stuck with it: State regulators got him a refund, and he switched to a supplier with a two-year rate guarantee that's saving him some money.

"I think deregulation's a good idea," said Malaro, a retired Nuclear Regulatory Commission employee. "The mistake was actually mine, for not looking into it. I said, 'Wow, I'm going to save a penny per kilowatt hour, sign me up.'...Once I had that experience, I knew enough to ask the right question, and that is: How long is this rate going to last?"

Maryland's "electric choice" market is the result of the state's 1999 deregulation law, which separated energy generation from delivery and set the stage for customers to shop for their power. Incumbent utilities still deliver electricity, regardless of where customers buy that energy, and they remain the default supplier for those who haven't switched.

Most Marylanders haven't. But the number shopping for electricity is rising sharply after years in which no more than 5 percent of customers used third-party suppliers.

As of July, 28 percent of customers at the state's four largest electric utilities were buying from suppliers, according to the most recent data from the Maryland Public Service Commission. That's up from 24 percent a year ago and 20 percent the year before that.

Part of the story is more options.

For the first five years that Marylanders could shop around, there wasn't much choice in "electric choice" — only one supplier sold to Baltimore Gas and Electric Co.'s residential customers aside from the utility. Companies complained that the settlement agreement between BGE and regulators over deregulation, which initially cut and froze BGE's rates, effectively insulated the utility from real competition for several years.

Now BGE's residential customers have 49 companies to pick from — triple the options of just three years ago.

With more competition have come websites aimed at helping people sort through it all, firms that think of themselves as the energy version of travel sites like Expedia.

"When states hit about a 35 percent penetration rate, there's almost a tipping point," said John Tough, director of business development for Choose Energy, which made Maryland its eighth state a few weeks ago. "Choice becomes more well known; people are more willing to talk about it and accept it."

Choose Energy, which faces locally based competitors such as ClearlyEnergy and PointClickSwitch.com, says its plan is to get everyone in Maryland shopping within three to five years.

"We want to bring the choice market to the masses," said Jay Webster, president of the Texas company.

Maryland's electricity market restructuring in 1999 was pitched as a way to drive down costs for consumers. Those who remember their rates back then might not see it as a big success: BGE customers have paid more for their energy alone in each of the past six years than for the combined cost of energy and all the infrastructure to deliver it 14 years ago.

Bob Barkanic, chairman of the Retail Energy Supply Association's electric market region of Maryland, Delaware and the District of Columbia, blames higher commodity costs, not the market structure. RESA notes that natural gas prices — and electricity rates — have trended down after spiking in the mid-2000s.

The fairer comparison is between the rates charged now by suppliers and utilities, Barkanic said.

"Customers continue to be able to save a lot of money by shopping," said Barkanic, senior director of energy policy for supplier PPL EnergyPlus.

BGE's energy supply charge is 9.623 cents per kilowatt hour through May 31. ClearlyEnergy, an Annapolis-based online comparison site, estimated that a full 12 months with BGE will come to 9.69 cents per kilowatt hour.

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