More Marylanders than ever are dumping standard utility service and buying electricity from independent producers. Unfortunately they've been making those decisions based partly on flawed information.
They are relying on a "price to compare" for the standard offer from Baltimore Gas & Electric and other utilities that's often outdated, confusing or both.
"If shopping persists, somebody will have to fix this," I blogged in February. On Tuesday, the Public Service Commission moved to do so, launching hearings on how to ensure that consumers can get good electricity information without having a master's degree in finance and a seat on the New York Mercantile Exchange.
The price to compare, which regulators require utilities to publish, stemmed from good intentions. When Washington Gas Energy Services and others began offering to beat BGE's standard electricity offer, consumers needed to see an official BGE price tag to determine whether the WGES deal was any cheaper.
Competitive offers are possible because of deregulation, which lets households buy electricity from third parties such as WGES while BGE remains the utility that delivers the juice. Something similar happened with telephones in the 1990s. You bought long distance from Sprint but kept Bell Atlantic as the local service.
An imperfect price to compare was tolerable when few people shopped for electricity and prices stayed more or less steady. But recent declines in wholesale prices have prompted more than 80,000 household customers to dump BGE's standard product and sign up with somebody else. The same falling prices have made the official price to compare way out of date and, in fact, a terrible point of comparison.
All spring BGE has been publishing a comparison price of about 12 cents per kilowatt hour. (This includes the cost of generating the electricity and transmitting it cross-country.) But that price was almost a year old and didn't expire until this week. For consumers in the market for future electricity, it was irrelevant and misleading.
At a minimum they should have been told that BGE's new price to compare, for June through May 2011, was going to be 10.75 cents. That made rival deals of around 10 cents look not quite so great. (Each penny less in the kilowatt-hour price means savings of about $10 a month for a typical household.)
"The current methodology for calculating and publishing a price to compare is providing misleading information to consumers and should be changed," argues the Office of People's Counsel, which represents utility consumers, in a brief with the Public Service Commission.
There's another problem. People taking BGE's standard product never see the official price to compare in the charges reflected on their bill! Although BGE's standard charges vary according to season, regulators mashed the higher summer and lower non-summer pricing into an annual, average price to compare that's available on BGE's website. Confusing.
So even if you had the up-to-date price to compare of 10.75 cents, you'd have to burrow into BGE's website to learn that you'll actually be charged 11.913 cents per kilowatt-hour from now through September, when air conditioning causes electricity use to soar for many families. Starting in October the actual charge will drop to 10.083 cents per kilowatt hour. (You pay another 2.4 cents plus other charges to have BGE deliver the juice to your door.)
BGE's purchase schedule is one reason the price to compare gets so stale. The utility doesn't publish a new price until it has locked up 100 percent of its future supply. That doesn't happen until several months before the price takes effect. But even then it takes too long for information to get out.
BGE had finished buying residential electricity for this summer by October. But the new standard price emerged not from a BGE announcement but from PSC Chairman Douglas Nazarian posting a comment on my blog in February. While blog readers were in the know, as recently as last month BGE was publishing a price to compare based on costs not from summer 2010 but from summer 2009.
Nobody argues that the present system works. BGE has already agreed to update its price to compare twice a year instead of the annual revisions it makes now.
The commission ought to go further, making utilities publish separate seasonal prices to compare as soon as new supplies are 100 percent locked up. It should also consider requiring disclosure of utilities' piecemeal purchases over the longer term so that consumers can get an idea of how prices are trending.
The price to compare as now published was intentionally made simple — a single number that consumers could use to reality-check the offers they get in the mail. But as the Office of People's Counsel points out, simple is no good if it's simply wrong.