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An energy reseller costs you more

For more than a decade, state regulators and energy marketers have been telling consumers that competition was the key to lowering their utility bills.

As it turns out, they were wrong. Really wrong.

In fact, roughly six of every seven National Grid customers who bought their electricity through an energy services company during the last two years paid more – almost $21 a month more – than they would if they had continued to buy their power from the utility. The relative few who did cut their bills didn't save much, an average of a little more than $2 a month.

The odds of saving money were even lower for natural gas customers. Fewer than 1 of every 11 National Grid customers who buy their gas from an energy services company paid less than the utility charged during that same 24-month period, and they didn't save much, at that – an average of about $2.50 a month.

For the 10 of every 11 National Grid consumers who switched to an energy services company, their choice cost them an average of almost $11 a month more, according to National Grid data that was disclosed earlier this month as part of the utility's quest for a rate increase.

"It's devastating, because the utilities and the Public Service Commission have been telling people they can shop and save," said Gerald Norlander, the executive director of the Public Utility Law Project, an Albany consumer advocacy group whose request for National Grid customer bill data led to the disclosure, over the objections of groups representing the energy marketing industry.

The findings are limited to National Grid, but the stunning results make it essential that a similar analysis be done for every New York utility, including National Fuel Gas Co. and New York State Electric & Gas Corp., the two other major utilities that serve the Buffalo Niagara region.

"My sense is the results would be pretty similar," Norlander said.

For now, though, it's clear that introducing competition into New York's energy's markets — the guiding principal for more than a decade — only served to give National Grid customers the power to make bad choices.

*From August 2010 through July of this year, National Grid customers paid a whopping $131.6 million more for their natural gas and electricity than they would have paid to buy it from the utility.

*Low-income customers — the ones who could least afford to pay more for their utilities — were hurt the most. More than nine of every 10 customer who switched to an independent supplier ended up paying more — an average of $18.50 a month more — for their electricity. More than 93 percent of the low-income customers who switched to an energy services company for their natural gas paid an average of $12.60 a month more.

"The numbers are startling," said Gregg C. Collar, a PSC staff analyst, in testimony filed last week.

To be fair, some consumers choose to pay higher monthly rates to lock in pricing for a longer period, when natural gas prices plummeted. Other consumers elect to pay more to support green energy. Energy marketing industry officials contend that those factors make it hard to evaluate deregulation by simply analyzing billing records.

Even so, the numbers also are very different from the 7 percent savings during the first two months that marketers dangle to entice consumers to move away from the utility — an incentive that Norlander said is nothing less than "a bait and switch that was legitimized by the PSC."

And they underscore the flaws in making competition the centerpiece of the state's efforts to reduce the high utility costs that burden residents.

"There's been a concerted effort to get people to buy their services from ESCOs," said William Ferris, the New York legislative representative for AARP. "Now, we find out almost 10 years after New York deregulated its marketplace, that this whole policy of deregulation may not have been in the best interests of ratepayers."

For starters, competition requires consumers to make wise choices about the direction of the energy market. Will prices go up in the future, which would make it smart to lock in a long-term rate, or go down, which would make a short-term pricing offer more attractive? Those are tough questions for analysts and energy professionals to answer, let alone consumers whose only exposure to the electricity and natural gas markets is when they flick on the light switch or the furnace kicks on.

The PSC has a "Power to Choose" website that provides the only comparative pricing tool available to consumers, but its usefulness is limited. The pricing data only reflects the price on the first of the month, not any changes that take effect after that, and it doesn't give consumers any way to compare how a marketer's pricing compared with the utility's in the past, noted the Retail Energy Supply Association, which represents energy marketers.

"It is extremely difficult and time-consuming for retail access customers to figure out if they should continue with a particular energy services company," Collar said.

In response, the PSC staff proposed — and National Grid last week said it supports — adding a tool to the utility's website that would allow customers to make cost comparisons using their past bill information, similar to one currently available on National Fuel's website. Ferris said a similar calculator should be available on the PSC website.

The PSC staff proposal also would tell customers who buy their electricity or natural gas through an energy marketer, in their monthly bill, what they would have paid that month had they purchased their energy through the utility. That information also would be included on termination and deferred payment agreement default notices sent to customers who have fallen behind in paying their electric or natural gas bills.

"This is just a first step towards price transparency because these calculators provide only a historical bill comparison," Collar said. It wouldn't help a consumer decide if they'd be better off buying their electricity or natural gas from the utility or an energy service company in the future.

"Somebody might be very low for natural gas right now, but what's important is what the gas will cost in January," Norlander said.