Looking to cut electricity costs? Now is a good time to shop

October 15, 2006|By Jay Hancock | Jay Hancock,Sun Columnist

In July, when the first part of the Baltimore Gas and Electric rate increase kicked in, I suggested that electricity prices would drop and counseled households to wait until fall before switching electric-generation suppliers.

Fall is here. While consumer kilowatt prices haven't declined as far as wholesale prices, savings can be had. The time to shop is now.

For the first time since electricity deregulation kicked in six years ago, it makes economic sense for Baltimore-area households to ditch BGE's standard product and buy kilowatts from a third-party supplier.

Families in the BGE service area might cut their bills by about $200 over the next year by switching. They may do even better by changing now and then changing again if kilowatt rates keep going down.

The plunge in 2007 electricity prices since late August - between 10 percent and 25 percent, depending on the month of delivery - has to do with a slowing economy and lower overall energy prices, especially natural gas, which fuels many critical generation plants.

BGE, which was required to buy juice for its standard product when wholesale prices were sky high, can't immediately dip into the cheaper market. It's completely committed through May, and substantially committed after that. But you're not. Alternative suppliers, who can dart in and out of the market when the omens look right, are buying the less-expensive kilowatts and passing the savings to households and businesses.

To be sure, switching electricity suppliers won't erase all of the 72 percent rate increase hitting the average BGE household after six-year price caps expired in July. And it won't cure numerous problems with the regulation, production and transmission of Maryland electricity that policymakers need to address.

But it's one way households can help themselves. Annual savings of $200 would wipe out about one-fourth of the 72 percent pop. And if you're still mad about soaring rates, you may receive emotional satisfaction by taking business away from Constellation Energy, BGE's parent.

Constellation is the main power supplier for BGE's standard residential electricity product between now and next summer. (BGE will always pipe the energy to your house, no matter whom you purchase it from.)

Rate relief

It's important to note that switching suppliers won't affect the rate-relief mechanism passed by the General Assembly in June, which defers much of the 72 percent rise until next year and requires nearly $400 million in consumer credits from BGE. Those factors get applied whether or not you swap vendors. (BGE believes it shouldn't owe the credits if Constellation's planned merger with FPL Group doesn't go through, but that's another story.)

Before you change, decide whether to lock in a price for one or two years or just through May, which is when many contracts offered by alternative vendors end. If you fear energy prices will spike back up, lock in as long as possible. If you think they'll fall further, which I believe is likely, go for a shorter-term deal and shop again when it expires. In any event, check for early-termination fees in case you change your mind in mid-contract.

Cheapest price

The cheapest residential kilowatts I could find last week were being sold by Washington Gas Energy Services (888-884-9437): 8.9 cents a kilowatt-hour for generation and cross-country transmission through May. (BGE's local "distribution" charge is another 2.37 cents.) That's 1.6 cents less than BGE's standard, non-summer price of 10.515 cents, and it'll save you about $15 a month from now through May, or $100. (If you use electric heat savings will be higher.)

The Washington Gas deal, however, comes with a $75 early-termination penalty. Ohms Energy (800-861-3914) offers a contract through May of 9.2 cents with no early-termination fee. The higher rate reduces monthly savings to about $12 but gives you an out if a better deal shows up.

Ohms also has the best longer-term price I could find: 9.4 cents for generation and transmission for one year or two - and no early withdrawal fee, says boss Sheirmiar White.

This would get you through next summer, when kilowatt usage and BGE's kilowatt prices will both be higher, and would save close to $200 over a year assuming BGE's standard prices remain unchanged. (BGE's costs for the year starting next summer are 50 percent locked in, but it will purchase kilowatts for the other half of its load in coming months.)

Check suppliers

Prices change, so check other suppliers before you pull the trigger. We've compiled Web-site links, phone numbers and other information on alternative electricity vendors on The Sun's "Electric Shock" Web log. (www.baltimoresun.com. Find on "Sun Blog Updates" on the right side of the home page.)

BGE has 1.1 million residential electricity customers. So far only 9,000 have switched to alternative kilowatt peddlers. That's fewer than 1 percent. Come on Baltimore. You can do better.

jay.hancock@baltsun.com

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