Md. rules could hurt poor who switch utilities

July 03, 2006|By PAUL ADAMS | PAUL ADAMS,SUN REPORTER

Louise White was skeptical when an energy marketer knocked on the door of her Northwest Baltimore home recently in hopes of getting her to switch to a competing provider for electricity and natural gas.

The door-to-door salesman told her she could save money over BGE's rising rates -- something the low-income mother of four is concerned about. But what he didn't tell her is that if she switched, the federal energy assistance funds she receives could not go toward paying the alternative supplier's portion of the bill because of a quirk in Maryland utility regulations.

Current rules require that federal and state assistance for low-income utility customers be applied only to service provided by BGE and other incumbent utilities that are dominant elsewhere in Maryland. Those companies are the providers of last resort in the communities they serve and are the only entities that can cut off a customer for nonpayment.

"I need to find out more before signing up with anybody," White said. "I wouldn't have known all that."

Consumer advocates say the rules appear to bump up against the primary goal of electric deregulation, an issue weighing heavily in the coming state elections. The General Assembly's goal in passing a deregulation law in 1999 was to encourage energy competition in Maryland and allow customers to switch providers. But under current rules, low-income residents -- those most in need of lower prices -- face a major hurdle when shopping for alternative suppliers.

The problem is made worse by the fact that most utility customers don't know about the restrictions, consumer advocates say. Though only a tiny fraction of BGE's consumers have switched to competing suppliers, the concern could grow now that several energy marketers are combing Baltimore neighborhoods in hopes of signing up thousands of customers because of the electricity rate increase.

"I don't mind if people switch, as long as they're informed," said Carol Clements, executive director of the Victorine Q. Adams Fuel Fund. The nonprofit charity, named for a Baltimore councilwoman who championed it in the late 1970s, helps low-income customers pay their utility bills. "The marketers don't care. They only care about signing you up."

The concern applies to low-income residents who receive Maryland Energy Assistance Program funds, or MEAP, as well as those who get aid through the state Electric Universal Service Program.

The problem lies in the complexities of deregulation and utility billing. When customers switch energy providers, only the electric supply portion of their utility bill is affected.

BGE and other traditional utilities deliver energy over their power lines and charge a fee for that service. Customers who switch still receive a bill from BGE, which shows the competitor's electric supply portion as a separate line item.

For low-income customers, energy assistance funds can still be applied to the distribution fee that BGE charges, but not the supply portion provided by the competing energy marketer.

If a consumer receives only a small federal assistance grant, the billing issue might not come into play because all of the money could be consumed in offsetting the utility's distribution charge. But with energy costs soaring, that portion of the bill is often dwarfed by the energy supply portion -- particularly during summer and winter months, when electricity use increases. That means that some low-income customers who switch providers might not be able to take full advantage of the assistance.

"If you're a consumer, you might want your assistance to go toward the most expensive part of your bill," said Mary Lou Kueffer, director of the Maryland Office of Home Energy Programs, which administers the MEAP funds.

The primary reason for the regulation is that only so-called incumbent utilities can cut off a customer for nonpayment, Kueffer said. If a customer fails to pay an alternative energy marketer, the marketer can simply cancel the customer's contract. But laws require incumbent utilities to take the delinquent customer back, leaving the utility to shoulder the risk of providing service and collecting payments.

"Because the utility is the provider of last resort, they feel they're entitled to have the energy assistance benefit given to them," Kueffer said. "They are the ones billing the supplier, maintaining records for the customer, and they have to reflect those benefits on their bills."

Computer and accounting constraints also play a role. Because of technical roadblocks, Kueffer said, her agency is unable to split assistance payments and give one portion to the utility and another to the alternative energy marketer.

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