POLL QUESTION

Maine’s newest electricity suppliers seem too good to be true

Posted Aug. 14, 2011, at 4:42 p.m.
Last modified Aug. 14, 2011, at 6:37 p.m.

Poll Question

For customers who want to sign up with a competitive energy provider, here are some things to know:

  • The Maine PUC keeps a record of all CEPs licensed in Maine. If a CEP is not licensed, it is not official and may not be reputable.
  • Although they’re licensed, some CEPs might not accept new customers. Potential customers should call the CEP to find out more.
  • Some CEPs — like Electricity Maine — work only with customers of CMP and Bangor Hydro, the two largest utilities in the state. Potential customers should ask the CEP if their utility is served.
  • Utilities, such as CMP and Bangor Hydro, are responsible for delivery and service. No matter which CEP a customer uses, power outages, billing and line maintenance are the responsibility of the customer’s utility. If they sign up with a CEP, customers will still get one bill from their utility. If their power goes out because of a storm, they will still have to call their utility. If their CEP goes out of business, they will be automatically switched to the standard offer rate and will see no interruption in their electricity.
  • Fees and sign-up requirements are up to the individual CEP, as are rates. Some might have fixed rates while others might offer flexible rates that change based on the market. Experts say customers should ask whether their rates are flexible or fixed, and for how long they’re fixed.
  • The PUC has more information about CEPs and the standard offer on its website: www.maine.gov/mpuc/electricity.

AUBURN, Maine — When potential customers call Electricity Maine, their tone is often incredulous, their questions borderline accusatory.

“Is this for real?”

“What’s the catch?”

“Is this some type of scam?”

Danielle Beckwith takes the calls. She’s heard it all. And she understands. Save money on your electric bill by doing something that’s about as easy as signing up for a library card?

“It sounds too good to be true,” said Beckwith, customer service project manager for Maine’s newest electricity supplier, based in central Maine.

But it’s an option that Maine’s large businesses have known about for years. Rather than accept the “standard offer” for electricity — an available-to-everyone electricity rate accepted by the Maine Public Utilities Commission and automatically calculated as part of a Central Maine Power or Bangor Hydro bill — they go with a lower rate quoted directly to them by a provider. Think retail versus wholesale.

While their savings will be a lot smaller, residential and small-business customers can do it, too.

Many simply don’t know they can.

“There is no catch and there are no gimmicks,” Beckwith said. “There’s just a better rate.”

The way things used to be

In 2000, state law restructured the electric utility industry in Maine. No longer could CMP, Bangor Hydro or any other utility both supply and deliver electricity. The goal: to create a competitive market for power. And with that competition, the hope was, less expensive electricity would follow.

Maine’s electric utilities — CMP and Bangor Hydro — decided to deliver, rather than supply, power.

Consumers could contract directly with suppliers if they wanted, but that was perceived as a potential hassle by state regulators. So to make sure every home and business had at least one good, automatic supply of power, the Maine PUC created a “standard offer.” As a result, the PUC now regularly accepts bids from suppliers, takes the lowest bid and makes the winner the default supplier at that bid price.

For most Mainers, the transition is seamless. They continue to receive electricity without having to research the market and sign up with a supplier. Their electric bills break down the cost of supply and delivery. Little else changes.

Under the new system, medium and large businesses began hearing from both in-state and out-of-state competitive energy providers. They were Maine PUC-licensed suppliers or middlemen who helped broker deals between businesses and suppliers.

Because medium and large businesses tend to use a lot of electricity, they took advantage of restructuring to shop around and negotiate their own prices. If they wanted a real-time, flexible rate, there was some risk involved. During low-market periods, they would enjoy lower electricity rates, but the rate would take a sudden jump if the market did. Businesses that didn’t want that risk could contract for a fixed rate.

Whatever the contract, the price a business ended up paying was often less than the standard offer. And from the business owner’s point of view nothing changed but the rate and the name of the supplier listed on the electric bill.

As of May 31 of this year, more than 84 percent of CMP’s large-business customers got their electricity from competitive energy providers, rather than taking the standard offer.

Only 0.5 percent of residential customers did.

Part of that is because far fewer options exist for residential customers. The PUC lists about 100 CEPs licensed to sell electricity to large commercial and industrial businesses in CMP’s area. It lists only 22 licensed to sell to CMP’s residential customers, and only a few are believed to be actually accepting or serving Maine customers.

There’s another reason most residential customers aren’t signed up with a CEP: They don’t know it’s an option, in part because most CEPs aren’t marketing to them.

“[CEPs], frankly, don’t want to spend the money to attract small customers because they don’t make an awful lot of money from that,” said Maine Public Advocate Richard Davies. “So they spend their resources on getting large industrial and commercial customers, many of whom are already pretty savvy on the subject and are already looking around for other alternative ways of buying their power.”

In other states, CEPs compete for residential customers. But Maine’s population is small and spread out. Marketing to Mainers takes more time, effort and funding. Here, a CEP can make as much money from a single large industrial customer as it can from 1,000 low-use, hard-to-get residential customers.

But while residential and small-business customers don’t have as many options as large businesses in Maine, they still have options. And at least one new CEP is working to make itself known.

Electricity Maine

Kevin Dean and Emile Clavet own more than 20 businesses, and they’ve used CEPs to power them for years. They got great deals on the electricity that runs their offices, but they had trouble finding a similarly great deal to power their houses.

So, this summer, the Auburn-based entrepreneurs — along with business partners Kirk Nadeau and Peter Whitney — created Electricity Maine, a CEP devoted to residential and small-business consumers throughout the state. It promises a current fixed rate of 7.99 cents per kilowatt-hour, 6 percent less than the standard offer of 8.49 cents for CMP customers and 3 percent less than the standard offer of 8.25 cents for Bangor Hydro customers. Electricity Maine says its rates could change when the standard offer changes, which is once a year for residential customers.

Electric bills in Maine break out the individual costs for supply and delivery. The delivery rate is set by the PUC; rates offered by CEPs apply only to the supply portion. For most homes, Dean and Clavet estimate, a residential customer opting to be supplied by Electricity Maine would currently see a savings of several dollars a month, or $75 to $100 a year. Not a gigantic savings, but Dean and Clavet think it’s worth making the change.

“I asked my golf buddies, ‘You’re telling me that if on the first of every month you got out of your car and saw a $5 bill sitting there, you wouldn’t pick it up?’ I mean, that’s really what it is. They would. Of course you would,” Dean said.

The men buy electricity directly from ISO New England, the power transmission organization for the region. They then sell that power to customers. If they get enough customers, they believe, they will eventually be big enough to buy electricity directly from power plants or other producers, allowing Electricity Maine to offer even lower rates.

Their rates are a little lower than the standard offer, they said, because standard offer bidders build in an amount of risk, offering rates low enough to win the bid but high enough to cover volatility in the market and to give them a profit. Dean and Clavet believe they can make money by shaving that margin.

“Our commitment is to everybody,” Clavet said. “We will always beat the standard offer. You’ll never, ever pay more than the standard offer, or we won’t be back.”

Dean and Clavet believe they’ve found a way around the challenge and cost of marketing to hundreds of thousands of residential customers: social media.

So far, most of Electricity Maine’s several hundred customers have heard about the company through Facebook, friends of friends, workplace discussions and a company flier.

“This is a business where money is made in fractions of a cent, so you can’t afford to spend a lot of money on television and radio and major advertising campaigns. It has to be that word of mouth,” Clavet said.

People are skeptical when they first call Electricity Maine. They typically brighten when they learn there are no fees or upfront costs and that they must only provide basic contact information and their CMP or Bangor Hydro account numbers — no credit card, Social Security or bank account information required.

Electricity Maine officially began operating this summer. Its customers will see their first changes on their next electric bills.

Not just about lower rates

Not every CEP seeks to attract customers by saving them money. For several years Portland-based Maine Interfaith Power & Light quietly gained followers by buying electricity from alternative energy suppliers and offering that green energy to Mainers. The power was as expensive, if not more expensive, than the standard offer, but it filled a niche among environmentally conscious energy users who wanted to support green energy, and it fit the nonprofit organization’s mission to help protect the world from climate change.

“It’s not life or death for our organization,” Executive Director Elizabeth England said. “We believe more it’s a moral obligation to have an alternative.”

At its peak a couple of years ago, Interfaith had 2,500 customers from all over the state, many of whom learned about it through churches and alternative energy events. Because all power is dumped into the power grid like water into a giant swimming pool, customers weren’t guaranteed that the electricity actually powering their child’s bedroom nightlight would come from a green source. But by buying from Interfaith, rather than accepting the standard offer, they were assured that a greater amount of alternative energy would be poured into the mix.

“The more the demand is for green energy, there will be more available,” England said. “Especially with utilities, consumers do have a voice.”

But Interfaith’s customers have less of a voice at the moment. The group’s supplier is no longer supplying power. Interfaith is looking for a new source and is tentatively in talks with a new partner, but the group has no electricity to offer until a deal is made. Right now, they’re out of that business.

Like any business, CEPs rely on suppliers, on having enough customers to sustain themselves and on financial stability. If any of those fail, the CEP can fail. When that happens, customers are automatically shifted back into the standard offer. They can stay there or choose another CEP. Customers don’t see any service interruption; only their bills will note the change.

“Daily, I get two or three emails saying, ‘This is no longer available? I don’t see it on my bill anymore,’” England said.

At Electricity Maine, Dean and Clavet believe their grass-roots, word-of-mouth push, easy sign-up and lower rates can increase consumer awareness of all CEPs in Maine.

And if greater awareness of CEP options means Mainers exercise their choice by signing up with a CEP that’s not Electricity Maine?

“We’re not afraid of the competition,” Dean said.

To see more from the Sun Journal, visit sunjournal.com.

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