After sifting through a mountain of off-the-wall enticements, consumers in New England became the first to choose their electric suppliers in late 1997. As more states pass laws opening up the electric utility industry, consumers should expect a barrage of tactics similar to those used by long-distance phone companies to attract customers.
Massachusetts Electric Co., a subsidiary of New England Electric Service (NEES), a public utility holding company, conducted a pilot program that allowed 4,300 state residents and small businesses to choose their own energy services company, or “ESCO.”
For over 50 years, electric utilities have been under strict regulation. States were carved into geographic regions with one electric utility given exclusive domination over the generation, transmission and distribution of electricity to residents in that area. But recently, in the hope of increasing competition and lowering rates, industry and consumer groups have moved to deregulate the last great monopoly-which generates over $200 billion in revenues annually. Compare that to the $50 billion long-distance telephone service yielded annually when it was deregulated in 1984, and you get a glimpse of the enormous ramifications.
In California, where consumers have had a choice since January 1998, the state took the lead in promising consumers lower bills of at least 10%. The rate reduction was financed by low-cost bonds, which will be paid back by tax payers over a 10-year period ending January 2008.
But there are those who aren’t so keen on deregulation. The Stanford University-based Energy Modeling Forum cautions that deregulation will reduce overall costs only if a few large firms don’t control prices in the new markets. Some consumer groups and politicians are concerned about possible environmental ramifications, protections for low-income and rural residents and “stranded costs.”
Stranded costs are the huge investments utility companies make that haven’t been recouped, such as the costs of nuclear plants or long-term energy supply contracts. While these costs could be passed along to consumers, some states have attempted to reduce that amount with guaranteed rate reductions.
However, there are many other questions and factors you’ll need to consider before choosing a supplier:
- What are your current energy costs? Make sure you have a clear idea what you’ve spent per month over the last year to compare your costs with those of a new supplier. Contact your local utility company and request a copy of your billing profile and usage history. Using a barometer of 100 units, determine costs in kilowatt-hours and dollars.
- Where is the energy supply coming from? For George Button of Northampton, Massachusetts, this was the most important factor in making his decision. “I chose a local company instead of giving it to a company from out of state to keep local dollars at work with local businesses.”
- What is the energy supply made up of? Button, along with two-thirds of Northampton residents, chose an environmentally conscious provider that uses renewable resources and cleaner forms of conventional power such as natural gas.
- Does your company have a contingency plan in the event of a disruption of service? In several states that