Retail electricity suppliers aggressively market low fixed rates to Connecticut residents, but many consumers are finding those initial savings give way to expensive variable rates that have more than doubled their bills.
John Erlingheuser of the Connecticut AARP says that seniors in particular are being targeted by telephone, direct mail, and even door-to-door pitches from marketing companies hired by retail electricity firms.
He says the marketing activity has become more aggressive now that the “standard offer” rate negotiated by the state is more competitive with what many of these retail suppliers offer. Some companies are offering gimmicks like restaurant points and cash rebates to lure customers into fixed length contracts that come with early termination penalties. And for some there may never be any real savings.
“The market is not good enough for anyone with a small amount of usage,” Erlingheuser said.
Erlingheuser added that many seniors use less than 400 kWh a month, so any savings realized by a retail supplier over standard offer may not be significant. And those small savings may quickly be negated by early termination charges or a significant rate increase after the fixed rate period ends and the variable one begins.
As an example, a senior who uses 400 kWh a month and signs up for the lowest offer right now, a 7.9 cents per kWh rate, would save approximately $32 over standard offer for the six month duration of the agreement. Following the six month promotional period, the account is moved to a variable rate that is not disclosed at the time the customer signs up. For some customers that variable rate was 20 cents for that same kWh of electricity, which would result in $43 of additional cost over standard offer in just the first month alone.
Depending on when the customer requests a change it could take as many as two full billing cycles before a new rate is applied to the account. And in the case of our example above, there is a $50 termination fee applied to any account that does not go until the end of the 6 month fixed period, so it may be impossible to avoid the higher variable rate without incurring the termination charge.
Erlingheuser says companies are getting away with these practices because there is not enough teeth to the state’s consumer protections.
“Nobody knows where to go with a complaint,” he said, “Fines are so small that [suppliers] are willing to risk civil fines because the payout is so much better.”
For households that use more electricity there are opportunities to save, but it takes some diligence to prevent falling into the trap of expensive variable rates. Here are some tips:
1. Visit the state’s supplier comparison page to do your shopping. Many other sites that show up in searches are run by brokers that are paid by the companies that are listed there.
2. Only sign up directly – do not use brokerage websites or respond to telemarketing calls or mailers.
3. Look for plans that offer a fixed rate and no early termination charges
4. Mark your calendar and shop around for a new rate two months before the end of your fixed rate period as it may take two billing cycles to switch to a new rate. Sometimes you may have to re-sign with your current provider to get their best rate.
Consumers can switch back to standard offer by contacting their electric utility.
The Public Utility Regulatory Authority announced on Friday that has “opened a docket” to look into complaints from consumers, and has scheduled five public hearings around Connecticut to learn about consumers’ experiences with electricity suppliers in the new marketplace. The hearing schedule is below:
Feb. 19, 6:30 p.m. in the City Hall Auditorium, 70 West River St., Milford
Feb. 20, 6:30 p.m. at the Farmington Community Senior Center, 321 New Britain Ave., Unionville
Feb. 24, 6:30 p.m. in Room 135, Brookfield Town Hall, 100 Pocono Road, Brookfield
Feb. 25, 6:30 p.m. in the Norwich City Hall, 100 Broadway, Norwich
Feb. 27, 6:30 p.m. in the City Hall Building, Veterans Memorial Hall – 2nd Floor, 235 Grand St., Waterbury