AUGUSTA – Senate Republicans issued a consumer advisory on Thursday after a staff investigation of electricity rates for retail consumers who filed complaints found that some rose by more than 200 percent. The investigation determined that the rate hikes involved the supply side of ratepayers’ electric bills and largely involved competitive electricity providers (CEPs), not Central Maine Power or Versant Power.
While most commercial and residential ratepayers fall under the Standard Offer rate, which is determined by a bidding process through the Maine Public Utilities Commission (PUC), CEPs are licensed by the Maine PUC and offer electricity supply from brokers and wholesalers at their own “retail market” rates. The concept behind CEPs is to drive competition and lower rates by offering alternatives to the bulk purchase rates set by the Maine PUC.
The marketing tactics of CEPs are often similar – door-to-door salespeople show up on your porch and offer you a great rate if you switch. In other cases, you may respond to a direct mail or telemarketing offer promising to cut your bill in half. Either way, CEPs usually offer an initial or “introductory” rate that many consumers have grown accustomed to for other types of services such as cellular phone service, cable and satellite providers or even your favorite streaming service.
However, ratepayers often see a marked increase to current retail or market rates once those introductory offers expire, which is what led to the current situation for many ratepayers in Maine who are not using the Standard Offer.
“We had one constituent whose bill went up 200 percent. In terms of dollars, we had another on a fixed income see her electric bill go from $275 a month to over $750 – that is just unacceptable,” said Sen. Russell Black, R-Franklin. “When electric bills are rising higher than what you even receive in Social Security, it should serve as a wakeup call for all of us that something is seriously wrong.”
According to Maine Public Advocate William Harwood, the recent spikes experienced by ratepayers who purchase their supply from CEPs has led to a cascade of complaints to his office. This usually happens after the introductory offer has expired and rates move to the retail rate driven by national or regional electricity markets.
“It appears that customers, once their contracts have ended, are being put onto a ‘variable’ rate, which will change each month driven by the electricity market in New England,” he said. “This has caused increases in electric bills for many Mainers this month, sometimes extreme and surprising – something we never want ratepayers to have to face.”
Harwood said that while the idea behind the CEPs was to promote competition and reduce rates in a post-deregulation environment, the reality has been much different since the Maine PUC has the power of bulk purchasing behind it for most of Maine. Additionally, Harwood said the Standard Offer is a 12-month fixed rate in contrast to the monthly fluctuations found with most CEPs.
“In the short term, we recommend consumers call their electric company and request to be put back on the Standard Offer as soon as possible. While that rate did go up in January, it remains one of the cheapest options and will remain steady until next year,” Harwood said. “Then, if a consumer wants to look for cheaper rates for coming months, they can visit our website or give the Office of Public Advocate a call and find out if there’s a CEP out there that offers a better rate.”
If a consumer does find a good rate and decides to leave the Standard Offer, Harwood advises to be wary of the contract terms with the supplier, including the actual rate and how long that rate will last, and whether the rate will stay the same throughout the term of the contract. Still, what has been happening at the end of the contract is what has lawmakers concerned. “If this isn’t the poster child for buyer beware, I don’t know what is. I hope we can find a solution soon – our seniors and others who are on a fixed income simply can’t absorb these huge price increases,” Black said. “At the very least, we can warn people right now to be careful what you sign up for; and if this happens to you, get help.”