Maine’s home electricity customers have served as guinea pigs in a free-market ruse long enough.
Hundreds of thousands of Mainers have been hurt by companies selling them electricity at a needless premium, by a market that promised lower prices through competition and hasn’t delivered.
After more than five years of this experiment, a report issued last week by the Maine Public Utilities Commission confirmed what we already knew: Maine’s competitive electricity market has harmed customers and sucked at least $77 million out of Maine’s economy over five years.
That’s unconscionable. That amount could have covered power bills for roughly 172,000 homes.
As Maine’s energy already costs more than the national average, this should remain a high-level outrage and policymakers should consider more sweeping changes to the residential, competitive electricity market, or shut it down.
With their report last week, regulators missed a major opportunity to provide more information to inform that discussion by conducting a lazy analysis that replicated the findings and methods already used by the BDN.
Their lack of interest in offering deeper analysis of the market is troubling, because the market is clearly broken. More information from regulators would have helped make the case for closing or fixing a market that needs more structure.
By default, state regulators handle power purchasing for customers. They take in bids from power suppliers on behalf of about 660,000 residential customers, who share benefits of buying in bulk, once a year. It happens without customers lifting a finger.
Otherwise, they can choose to go with a private company. Most often, those companies say they can do better, offering lower prices.
That’s a pretty easy calculation for customers to make. Is the one-year contract offer from the private company cheaper? Bingo. At the moment, some private companies are back to beating the standard offer, but by tiny fractions of a cent, and likely temporarily.
The potential upside is tiny, and the known downside is big. At least $77 million big.
Maine lawmakers have done well to protect customers from abuses there, passing a law to restrict those companies’ ability to lure customers in with low introductory rates and quietly re-enroll them later, at a higher rate. The rules prohibit companies from assessing “exit fees” for customers who are re-enrolled without consent, and they require an actual “yes” from a customer if the new plan raises the power rate 20 percent or more.
But we don’t think that will stop customers from getting ripped off. In fact, we know it won’t.
In Connecticut, where regulators have cracked down hard on competitive suppliers — and done much more detailed studies of their operations than in Maine — AARP advocacy director John Erlingheuser said that “for everything that we do to rein in a bad practice, they come up with a new one.”
That’s only going to grow worse and more confusing as the market gets more complex.
The industry itself makes that case.
In the face of cost comparisons showing the industry’s drain on the economy in Maine and other states, such as Connecticut, the trade group representing retail suppliers argue they offer something different from the “plain vanilla” standard offer electricity service. So, don’t compare them, they say.
We ask: What then, is the point of the competitive market if we shouldn’t compare them on price?
Maine policymakers and regulators have a responsibility to ensure that customers can shop in a transparent marketplace — if such a marketplace is to exist at all. They should consider implementing a more structured marketplace where Mainers can shop for power and compare renewable power offerings to similar renewable offerings, and so on.
If the companies decline to tell customers which products are similar enough to compare on price, regulators need to step in and require that.
If companies say they can’t abide by those kinds of restrictions because it would raise their costs and thus the costs to customers — a favored canard — regulators can go ahead and shut it down.
Because, as it is, those retail suppliers aren’t doing us any favors.
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