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Looking For An Electric Company With Lower Prices? What Massachusetts Residents Need To Know

Recently, sales representatives from several energy companies rang our doorbell. Some of the electric company names: Direct Energy, Just Energy, and Spark Energy. My wife and I listened to some of their pitches, because our electric bill went up during the past few months. Way up.

This blog post discusses what we experienced and learned during our search for another electric company, including some online tools and the criteria we developed. I've written about some of the companies in this blog. A sales rep from Just Energy first visited in 2010. Should you decide to switch to another electric company, that's something only you can decide. You know your electricity needs and home situation best. Hopefully, this blog post will help you identify the considerations to make the best decision possible.

Before choosing a new supplier, consumers should first understand their usage. We did. Our latest bill:

Electric ServicesRate ($/KWH)KWHTotal $
Delivery Services:
Customer Charge
Distribution
Transition
Transmission
Renewal Energy
Energy Conservation
Delivery Services Total
--
--
0.06090 X
-0.00095 X
0.01913 X
0.00050 X
0.00250 X
--
--
220
220
220
220
220
--
6.43
13.40
-0.21
4.21
0.11
0.55
24.49
Supplier Services
Generation Charge
Basic Service Fixed
--
--
0.15045
--
--
220
--
--
33.10
Total Cost of Electricity     57.59
Other Charges Or Credits
Storm Performance Adjustment
    --
1.38
Total     58.97

KWH is a kilowatt-hour. Electric bills include two broad categories of charges: delivery and generation. Standard stuff. The Massachusetts EEA Department site explains electric bills:

"Delivery charges include: distribution, transmission and transition charges, as well as costs related to the development of renewable energy sources and efficiency programs... The only way to reduce the delivery portion of your bill is to use less electricity..."

The EEA Definitions page explains:

"Generation is the act of converting various forms of energy (such as oil, gas, coal, sun, wind or nuclear) into electricity. Generation is the only part of the electric industry that has been opened to competition. The transmission and distribution of your electricity will continue to be regulated..."

Competition started In Massachusetts in March 1998 after passage of the Massachusetts Electric Industry Restructuring Act of 1997 (“Restructuring Act”). EverSource (formerly N-Star) is the utility that provides our electricity.

Next, we reviewed our monthly bills. This helped us understand how high the price had risen:

 Generation Charge
MonthCents Per KWHCumulative Increase
January, 2014 8.448 --
July, 2014 9.333 10.5 %
August, 2014 9.357 10.7 %
September, 2014 9.379 11.0 %
February, 2015 12.212 44.6 %
March, 2015 15.046 78,1 %

78 percent is a huge price increase. Our historical usage by type of charges:

MonthKWHDelivery ServicesGeneration
January, 2014 322 $ 34.42 $ 24.17
July, 2014 284 $ 30.68 $ 26.51
August, 2014 299 $ 31.77 $ 27.98
September, 2014 278 $ 29.85 $ 26.07
February, 2015 301 $ 31.59 $ 36.76
March, 2015 297 $ 31.05 $ 44.69

You'll probably want to analyze your bills like we did. Our residential usage averages about 300 KWH monthly. So, delivery charges decreased slightly while generation charges have almost doubled. Not good. So, we started to shop around for service from another electric company.

The sales representative from Direct Energy quoted (verbally) a price of about 9 cents per KWH. An online search found a C+ rating of Direct Energy by the Better Business Bureau (BBB). Too many complaints and too many unresolved complaints. Not good. Some of the complaints were similar to what we'd learned about Just Energy. The door-to-door sales representatives were mostly college-age students. Most immediately demanded to see our monthly utility bills without first fully explaining their offers. A general statement about a fixed, lower price is not enough.

We've learned that often the devil is in the details. It is wise to closely read the contract, because that document describes what you get, what you pay, and any associated fees. We don't buy on impulse. Plus, the Massachusetts Attorney General advised consumers about door-to-door sellers of electric and gas services:

  1. Check your utility bills: to make sure that your service has not be switched to a different provider
  2. Protect your sensitive information: do not show your utility bills to door-to-door sales people. Only show your utility bills after you have decided to do business with a provider.
  3. Be cautious: your current service provider does not send door-to-door sales people.
  4. Know your rights: do not let door-to-door sales people into your home unless you know them personally. Contact local police if the sales agent refuses to leave or you believe you are threatened.

Meanwhile, the folks at Spark Energy sent (unsolicited) their flyer via postal mail:

Spark Energy flyer. Click to view larger version.

The flyer quoted $36.00 in monthly savings. It is important to read the fine print because that quote was based upon a home using 1,000 KWH per month. Do you use 1,000 KWH in a month? We don't. Not even close. We use about a third of that, or 300 KWH per month. So, our savings would be far less: (14.90 - 10.80 cents per KWH) X 300 KWH = $12.30. Big difference.

To learn more about Spark Energy, I visited its website. To view information, the site asks you to first enter your ZIP Code. I did:

Spark energy plans. Click to view larger version

It presented several plans for where I live. Some plans included renewable energy sources, with a higher price. I selected the "Details" link for the Price Protect 12 Month plan. It mentioned a $4.95 monthly fee and a $100.00 early termination fee. Not good. This meant our savings would be even smaller: about $7.35 (equals $12.30 - $4.95) monthly if we had purchased this plan. That's about the price of two cups of coffee and a doughnut. Not much.

The Spark Energy flyer also had a postcard attached which promised big savings:

Choose Energy postcard. Click to view larger version

The postcard mentioned ChooseEnergy.com. I visited the site. To view information, the site asks you to first enter your five-digit ZIP Code. I did:

Choose Energy screen one. Click to view a larger version

The site displayed recommended plans (above) and a sortable list of available plans in my area:

Choose Energy screen two. Click to view a larger version

There were several plans; some from the same provider. The plans differed by KWH price, by duration (e.g., six, 12, or 24 months), by renewal energy mix (ranging from zero to 100%), and by fees (e.g., early termination fees from $100 to $200). The site has some strengths and weaknesses.

The key strengths: it's free, easy to read, can easily sort the list of plans, and can easily access contract details about each plan. The key weaknesses: uses a high default KWH usage, can't search for by specific fee type (e.g., monthly, termination, billing, deposit, etc.), and ambiguity about what happens at the end of the contract or when you move. At the end of the contract, many plans default to a higher, variable price. That may be good for the electric company, but not good for consumers who want a predictable low price. I wanted to search for plans that auto-renew from a low fixed price to another low fixed price. The site doesn't seem to provide that search feature.

After reading the contracts for several plans, I learned that some include terms where the plan automatically switches to  your new residence when you move. What? I expect a move to terminate the contract. The site needs to clarify this; and ideally make it a search criteria. The contract for one plan read (bold emphasis added):

"XOOM is an independent retail marketer of electricity and is not affiliated with your local utility. Your local utility will continue to deliver your electricity, read your meter, send your bill, and make necessary repairs. Your local utility will also respond to emergencies..."

What's really going on here? The Massachusetts EEA Department site explained:

"If a consumer selects a competitive supplier, he/she will be paying both the distribution company (for the delivery charge) and the competitive supplier (for the generation charge). Depending on the competitive supplier, the consumer may receive one bill (combined billing) or two separate bills. In general, smaller consumers (residential and small commercial) will receive one bill from the distribution company. The distribution company will then transmit generation charges to the consumer’s chosen competitive supplier."

So, when you switch to another electric company, it's really a partial switch. You might get a single monthly bill or you might get two monthly bills. The legacy utility still has a role to deliver your electricity and maintaining the electric grid. Deregulation hasn't changed who produces electricity. Deregulation only lets consumers select from a larger group of power suppliers.

The two-bill possibility highlights the economics of the electric power industry. It requires a massive amount of money to build (and maintain) a power plant. Even more to build (and maintain) the electric grid: the network of power lines and facilitates that carry and distribute electricity from power plants to your home. No supplier can afford to build a parallel, duplicate structure. So, regulation was used to guide a naturally monopolistic industry to avoid abuses. Maybe you studied this in economics classes during college.

We've seen this economic situation before. Telecommunications. Originally, there was a single supplier (AT&T or "Ma Bell") guided by regulation. Then, the market was deregulated in the 1980s with local service providers and long-distance providers. With that deregulation, competing companies still shared the existing infrastructure of phone lines and local facilities. Economically, it wasn't feasible to build duplicate, parallel structures. With the introduction of wireless services, suppliers began building their own networks. Some got out of the landline business.

All of this raises the question: what benefits have electric deregulation provided consumers? Deregulation seems to have fallen far short on its promises. Advocates promised lower prices from competition. The fact is competition exists only with electric generation. We consumers have gotten slightly lower prices in some instances, and far higher prices in many other instances. Remember, after crunching the numbers we found the savings were minimal; eaten up by monthly and other fees. And, that savings assumed no price spikes at the end of the contract.

So, the Choose Energy site seems like place to start your search. it's mildly helpful but lacking some key features. It would be more helpful it it included a search parameter for plans guaranteeing single, consolidated monthly bills. The site lets you filter or narrow your search results to plans that have or don't have fees. That was mildly helpful, but it seemed too general and inconsistent. For example: I filtered my list for plans to show only plans without fees. The site presented a Just Energy plan where the contract fine print stated it might pass through a Billing Fee from the Utility. What's that? How much? Neither the site nor the contract explained this. I expected more. A "no fees" filter option should mean just that.

And, there's the issue of deposits. Some plans require them. This should be a search parameter, too.

I found that whenever I left my list of plans to read other site pages and returned to my list, I had to re-enter into the calculator our (lower) KWH monthly usage instead of the (higher) default usage amount. A better site experience would:

  • Prompt users for their KWH monthly usage and remember those selections,
  • Provide searching by fee type (e.g., monthly, cancellation, billing, deposits, etc.),
  • Be consistent about "no fees" filtering,
  • Provide searching for move terms, and
  • Provide searching by contract end terms.

All of this caused me to wonder exactly who Choose Energy is. I browsed the About section of its site. It didn't say much beyond the basics: company values, executive names and photos, press releases, a San Francisco street address, and this corporate description:

"Choose Energy™ is an easy-to-use online marketplace that helps residents and businesses comparison-shop for their ideal energy supplier... that provides a convenient and secure way for consumers to compare rates and plans for energy suppliers in their area – and make the switch all in one place. Plans are curated from only reliable and trusted suppliers and provide renewable options as well as flexible pricing to ensure customers find the plan that best fits their needs. Choose Energy is available in 11 states currently, with additional states coming on-line in 2014.

Typical content. I expected more. The copy was old, too. It's 2015, not 2014. If the site can't update this, then I wonder what else is lacking. The site should explain its process and criteria for curating plans and providers. If it has an explanation, I couldn't find it. A sales person from Direct Energy visited our home, but the Choose Energy site didn't display any Direct Energy plans for my ZIP Code. Why the difference? Which is correct?

The more I looked, the more questions I had. How can people based in California be experts about the Massachusetts energy marketplace? What are the details about its partnerships with energy companies? The Choose Energy site listed its corporate values:

Choose Energy values. Click to view larger image

For the executives at Choose Energy, I have this feedback: if you are serious about disrupting the industry, raising the bar, and being transparent, then do it. No half measures. Include the additional search parameters suggested above. Your site page describing Just Energy doesn't mention the company's $4 million payment to settle deceptive marketing allegations. Why not? That seems like pretty important information for consumers to know. Don't hide stuff. Elevate all of the important details from contractual copy. Make it searchable. Explain your curate process. Surface all the nitty-gritty. That's what consumers want. Half measures give the impression that your site is nothing more than a slick industry marketing scheme, and not a reliable, independent information resource for consumers.

Next, I visited the Mass Energy site to learn more. The FAQ page answered many of my questions:

"In Massachusetts, over 80% of our electricity is generated from fossil fuels and nuclear power resources... the remainder comes in the forms of trash-to-energy, large hydro projects, various, unidentified types of power imported from other regions, and other sources that are not environmentally friendly. A state law, the Renewable Portfolio Standard, requires your utility to include just 8% new renewables in 2013, with a 1% increase per year. Your utility is required to send you a quarterly disclosure label which describes in detail the energy sources and emissions resulting from the electricity you use... All New England states share one single network of power lines, called the electric grid. Generators from all over the region feed power into this grid and energy is drawn out on an as-needed basis. Since our electricity is based on a regional mix, the electricity that is actually delivered to your home is determined by which power generators are located closest to you..."

The Mass Energy FAQ page also mentioned something I hadn't read anywhere else:

"Mass Energy is a non-profit organization, and your payments are recognized as being made for the public good. They are considered a tax-deductible charitable contribution for federal income tax purposes, if you itemize on your federal return. If you are enrolled in New England GreenStart, you would be able to deduct 2.4 cents for each kilowatt hour... If you are enrolled in New England Wind, you would be able to deduct 3.8 cents per kilowatt hour... You cannot get this benefit from any other renewable energy supplier in Massachusetts..."

So, while you might pay a little more for energy from renewable sources, there is the tax-deduction benefit to consider. More numbers to crunch. As we searched for an alternative electric company, there was more to consider than we first thought. No way is this an impulse purchase.

Some states offer their residents websites that compile offers from several electric providers into a single place. If you live in Texas, visit Power To Choose. The Choose Energy site covers Massachusetts and several other states: Connecticut, Illinois, Maine, Maryland, Michigan, New Jersey, New York, Pennsylvania, and the District of Columbia. I am sure that there are other sites for other states.

As we researched suppliers, we began to compile a list of criteria about what we wanted from an electric company. Our list was based upon our needs and our values:

  1. Foremost, a lower and predictable generation price
  2. A contract with the most consumer-friendly terms possible. Ideally, no monthly fee and an auto-renewal process that won't hike its price of electricity.
  3. A provider offering energy from "green" or renewable sources. We live in a small condominium, and the other two owners are not interested in installing solar panels or a small wind turbine. Exterior modifications must be agreed upon by all three unit owners.
  4. A reputable provider with good customer satisfaction. Does it have few or many complaints? Does it respond quickly to inquiries? Does it honor its contractual commitments? There are several Internet sources consumers can use. I mentioned the BBB above. Besides news reports about Direct Energy, I read the Glass Door site, which features reviews by current and former employees. If a provider can't keep their employees happy and solve staff churn, then they probably won't keep their customers happy either.
  5. A provider that doesn't abuse customers' privacy, and is transparent in their policies about customers' data collected, archived, and shared; and lists its business partners.

You'll develop your own list of criteria. You should. You may want the wireless convenience, such as programming your heating/cooling levels with your smartphone. Or you may want your heating/cooling controls integrated with your home security system. Or, you may want a provider that parses your electric usage by appliance consumption. There is a whole new world of choices available.

And, it's easy to verify an electric company's identity. The Massachusetts EEA Department maintains a list of licensed companies. If a company that contacted me (via phone, e-mail, etc.) isn't on this list, I wouldn't do business with them. And I definitely wouldn't share my bill details or any personal information.

Unhappy with your current electric company? Massachusetts residents can submit complaints online at the Department of Public Utilities (DPU) site, or via phone or postal mail.

The bottom line: it is still a roll of the dice. When you switch to another electric company, you are essentially betting that the price in their contract you sign will be lower than the market price, or what you would have paid otherwise. If it is lower, then you've won. If it's higher, then you've lost. Of course, the electric provider is betting against you; that the price you pay them will be higher than what you could have paid otherwise. If the price is lower during your contract, they hope to raise it much higher when your contract ends. After all, a for-profit business has to make its money somehow.

That sounds a lot like how consumers purchase wireless plans for smartphones. You sign a two-year contract making three bets: a) the monthly price you pay will be lower than what you might have paid otherwise; b) your calls, texts, and Internet usage won't exceed any caps so you avoid additional fees; and c) you won't have to terminate early and pay a high cancellation fee.

How well did you do with your wireless plan choice? A lot of consumers chose poorly and experienced huge monthly wireless bills. Now you know what you' face with electric suppliers. Do your homework, shop wisely, and read contracts before signing them.

We're still looking. What sites have you used to research electric suppliers? What criteria did you use when selecting an electric company? Did you switch or stay with your legacy utility? Why?

Comments

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Diane Simpson

Mass Energy (in Massachusetts) and People’s Power & Light (in Rhode Island) make up "Energy Consumers Alliance of New England", an IRS-designated 501(c)3. They are an awesome company. I used to work for them November-February in the heating oil program. The only reason I left is because I got a year-round job. They are truly dedicated and knowledgeable people on the topic of electricity and renewable energy. Phil Lindsey runs the heating oil program. They do an amazing amount on a shoestring!

R. Michelle Green

I live in a locked door apartment building, but someone let the clean cut guy with the clipboard in with them, so I got a knock on my door. He flashed a badge that said "agent representative" of a company that seemed familiar. Was it Nstar? Was it New Energy? too fast to see/remember. He pointed at a bill mockup to tell me the rates were going up, and he wanted to see my bill to "ensure that the rates were proper". I told him I was leaving in a few minutes, and couldn't talk to him now. He asked when he could come back. I said "some other time." He smiled and said were mornings afternoons or evenings better? I said mornings and closed the door. The entire interaction took maybe 90 seconds.

He didn't announce himself as a salesperson, or ask if I wanted to lower my rates, or learn more about rate changes. He wanted to see my bill. He could tailor his actions and approach from there.

George's advice is excellent -- do NOT offer your bill to someone just because they ask for it. If you've ever wondered why you go through so many hoops if you change long distance carriers on a phone, it's because way back when, deregulated phone companies switched people without their knowledge. The same behavior is going on with many energy companies in Massachusetts.

Thanks George for sharing some tools to help people like me make decisions.

Darlene

George,
Thank you for excellent information that would have been daunting to gather!

George

Received a phone call today from Starion Energy (http://starionenergy.com/ ). The phone rep offered 9 cents per kilowatt hour (Kwh) for my Zip Code. I asked the rep what fees they charge. Rep said a "supplier fee" of 24 cents per day.

The math:
A = Starion's supplier fee = 24 cents/day X 30 days/month = $ 7.20
B = Our recent usage = 280 kwh/month
C = Generation charge last month by our utility = 10 cents/kwh
D = Starion generation rate quote = 9 cents/kwh
E = Estimated generation rate difference = C - D = 10 - 9 = 1 cent/kwh
F = Generation savings = B X E = 280 X 1 cent = $2.80 per month
G = Net savings/(loss) = F - A = $2.80 - $7.20 = ($ 4.40) per month

Starion's monthly fee exceeds the generation savings. So, it's not a good deal for us given our usage. Rates for your Zip Code may be different. Your monthly kwh usage is probably different. I haven't checked Starion's consumer agreement to see what might be buried in there. No need for me to look further.

Fees matter folks!

George
Editor
http://ivebeenmugged.typepad.com

George

Readers:

I should have posted this sooner. On May 29, I received a nice e-mail from the Kerry Cooper, the CEO at Choose Energy. The e-mail:

"George, I wanted to reach out and say thank you for your comprehensive review of electricity shopping in MA and your frustrations with our site. It was comprehensive and spot on in the things we need to work on. We will do better! We aim to be a great customer advocate and make a daunting process easier - and have a ways to go. Thank you and have a great weekend,"

later this fall, I will revisit the Choose Energy site, and report in a future blog post what I find.

George
Editor
http://ivebeenmugged.typepad.com

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