We’re nearly two decades out from the moment Maryland lawmakers decided to deregulate the state’s energy markets in hopes of boosting competition and driving down prices for consumers. A first-of-its-kind, state-commissioned report confirms what some observers already figured: Many Marylanders are getting swindled on their rates by third-party suppliers.
The report, published this week by the Maryland Office of People’s Counsel, concludes that based on the advertised rates of third-party electricity and gas suppliers—ones that aren’t the main provider for a coverage area, such as BGE here in Central Maryland, or Pepco in the D.C. area—consumers are paying roughly $54.9 million more for their energy than if they simply went with their assigned utility’s supply.
That loss comprises $34.1 million in residential electricity expenses, and $20.7 million in residential gas expenses. Broken down among the 438,020 households who’ve signed up with third-party suppliers, that translates to about $169.38 per year.
Writing for Baltimore Fishbowl previously, Laurel Pelter (aka GreenLaurel) has explained how this happens. Under the Electric Customer Choice and Competition Act of 1999, enacted in the wake of other states taking a similar pro-free market policy change, households have been permitted to go sign up with a third-party supplier, of which there are about 60 in all, that can set its rates independently of the standard set by BGE or other large suppliers.
Those third-party companies can change the cost of energy on a monthly basis with “variable rates” after a household’s initial contract is up. Think of how Comcast might offer you $80-a-month cable and internet for the first year, followed by, say, $120-a-month for year two–except during that second year, the rate could change every month instead of remaining fixed at $120.
And while the state requires those suppliers to publish somewhere, at least 12 days before the billing period ends, what their rate for the next month will be, the rule isn’t closely enforced, the report says.
So what’s this mean for the one in five Maryland households that have opted for the competitive energy market instead of their given utility? “We are not seeing the consequences of just a few consumer choices,” the reports’ authors say, “but rather the consequences of wide-spread, substantial harm associated with consumers’ purchases in a complex market where pricing information may be obfuscated by marketing and sales claims, prices are volatile, and not all suppliers comply with existing law and regulations.”
We’ve reached out to the Retail Energy Supply Association, a Pennsylvania-based trade group representing third-party suppliers, for comment on the Maryland Office of People’s Counsel’s report.
In public testimony to the Maryland Public Service Commission from this summer, RESA touted the perks of going with a third-party supplier, such as the ability to save compared to standard rates over the long term, offerings like smart thermostats that allow customers more control over energy usage and rebates or discounts from third-party suppliers.
“Measuring the success of the retail market only by looking at price fails to adequately capture the true value of choice, convenience, and innovation,” the group said.
The state-commissioned energy policy analysts behind it, Susan Baldwin and Sarah Bosley, wrote that to really pay attention to variable rates and get the best bang for one’s buck, a consumer would need to be sure they read all of the fine print when they sign up, have access to internet—which is “far from universal” statewide, they note—and regularly monitor a company’s pricing changes.
“The day-to-day chore of evaluating energy costs may overtake the theoretical possibility of customers making rational decisions in their best interests,” they write of that undertaking. Basically, it’s buyer-beware.
The report recommends the state’s Public Service Commission create its own division dedicated to enforcing pricing rules (a step already recommended by a working group four years ago), enhance transparency for consumers to make better-informed decisions and more actively prevent suppliers from deceiving customers.
All of this analysis still doesn’t tell the full story of how much Marylanders are overpaying, as the authors of the report used advertised rates, not the actual amounts that have been billed, as their standard. But it does offer some estimate of the economic impact of deregulating energy 19 years out from the change enacted by state officials.
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