Electricity price claims from independents await reality jolt

August 02, 2010|By Jay Hancock

A great deal on electricity landed in my mailbox last week. At least that's what it looked like.

`"12 Month Guaranteed Low Rate," said the junk mail from MX Energy. "16% lower compared with BGE's current summer rate." And, in a big headline: "Save over $100 on your Electricity."

But that's not true. You'll be lucky to save $30 over a year, not $100. The BGE summer rate MX is comparing against disappears in two months. That's about how long it could take MX to switch you over, in any event. By then, BGE will be charging only 10.08 cents per kilowatt hour for generation and transmission, only a sliver higher than MX's fixed price of 9.9 cents.

That's not worth a big headline, and it's not worth your signing up with MX.

More independent suppliers than ever are hawking electricity to Maryland households. Deregulation a decade ago made this possible. But only now have the pitches here approached levels reached in other deregulated states such as Texas and Massachusetts.

The Maryland Office of People's Counsel, whose website is the best one-stop shop for comparing deals, lists 10 companies offering electricity packages to households in Baltimore Gas & Electric territory (opc.state.md.us). Several are new to the market.

Unfortunately much of the advertising from these companies is misleading, seizing on BGE's temporarily high prices to imply that the monthly savings you get by switching will last a long time. But it won't. On Oct. 1, BGE's standard price plunges from 11.91 cents to 10.08 cents. (You pay another 2.4 cents for BGE to deliver the juice to your house.) That's only 6 percent higher than the cheapest deals on the OPC's list.

My advice: If you haven't switched, don't do anything until the fall. By then, competitors will be forced to lower their prices if they want to compete with BGE's standard offer.

If we don't get another Hurricane Katrina to disrupt Gulf of Mexico energy commerce, the wholesale megawatt market might allow them to do it. And if a hurricane does drive up wholesale electricity prices, you've got a safety net by sticking with BGE, which has already locked up its supply until June.

Debaters love having a "straw man" to knock down. This summer, companies selling electricity in Maryland have an equally spineless straw electricity price they can use to make themselves look good.

Sure, MX discloses that BGE's expensive, standard price lasts only through September. But it's in tiny print on the back of the flier.

Viridian Energy, a multilevel energy-marketing company that is new to Maryland, advertises "average monthly savings" of 17 percent for BGE customers who sign up for its 9.9-cent, variable-rate deal. Same problem as with MX. Even if Viridian's price stays at 9.9 cents, those savings will virtually disappear when BGE's standard price changes in two months.

Advertising from BTU Energy and Constellation Electric is a little better but still misleading. Those companies compare their offers with a standard BGE price of 10.75 cents per kilowatt hour for generation and transmission. This is an average of BGE's high summer and low non-summer rates over 12 months starting June 1.

But as noted, the summer rates are almost history. It typically takes six weeks to switch electricity suppliers, according to Maryland regulators. By then summer will be over. None of the offers being made to BGE households looks substantially better than what you'll get from BGE on Oct. 1 by doing nothing.

For MX's part, the company is switching customers faster than six weeks, so BGE customers still may reap substantial savings before Oct. 1, says David Fargnoli, MX's senior director for market strategy. The Maryland Public Service Commission has to approve marketing literature from retail electricity sellers, he said.

As for Viridian and its 17 percent monthly savings, "it's not that we are saying, 'No matter what, you are going to have 17 percent savings on your bill,' " said Viridian operations analyst David Brima. "We do know that BGE will be changing their rates in October. We can't say that we know what our rates will be that month. But we can say we'll be competitive."

Unlike MX and some other marketers, Viridian doesn't make you sign a contract. So presumably you can dump the company if its prices become unattractive. MX charges a $150 early-termination fee.

It's complicated stuff. The PSC has been trying to make things clearer by requiring electric utilities to publish separate "prices to compare" for summer and non-summer months. But clarity obviously has not arrived.

This is August. For all practical purposes, the real price to compare for BGE generation and transmission is the 10.08 cents that kicks in Oct. 1. If competitive suppliers can't substantially beat that, it's not worth the trouble to switch unless you fear another energy price spike and want to lock in with Constellation Electric, for example, for three years.

Hey, electricity marketers: Sell consumers kilowatt hours at 9 cents flat. Then maybe we can do some business.

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