May 27, 2019
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Maine’s experiment with retail competition failed to lower electric bills

George Danby | BDN
George Danby | BDN

Nearly two decades ago, Maine embarked on an experiment in retail competition for electricity supply. Part of the bundle of changes we called “electricity restructuring,” retail competition allowed all electricity customers, for the first time, to buy their electricity from the competitive supplier of their choosing. This supply would be delivered over the transmission and distribution system owned and operated by the electric utilities, which remained a regulated monopoly. Those customers who choose not to shop for their electricity supply would receive standard offer service, competitively purchased through the Maine Public Utilities Commission on their behalf. While retail competition started slowly, in recent years nearly 30 percent of residential customers bought from a competitive supplier.

Does retail competition benefit consumers? A recent investigation by the BDN showed that from 2012 to 2015, Mainers who bought electricity from competitive suppliers paid $50 million more than they needed to for their electricity. Other states have found similar results. A recent investigation by utility regulators in New York found that since 2014 residential customers who signed up with competitive providers paid $820 million more than standard service. The Connecticut Consumer Counsel determined that in 2015 Connecticut customers paid $58 million more than they would have if they kept standard service. It looks like the best way to save money with a competitive supplier is not to buy from a competitive supplier.

At the Office of the Public Advocate, we’ve known this for a while. Each month we track and post the prices offered by the most popular competitive electricity suppliers in Maine. In most months, prices from competitive suppliers are either above the standard offer price or just a fraction of a cent below — at best, a savings of just a few dollars month for the average residential customer. And nearly every day we receive calls from customers of competitive suppliers who just discovered they are paying far more than the standard offer rate or had their contract renewed at a higher rate without their consent.

In response, we’ve tried to help customers make informed decisions through our website and print publications, and we’ve fought for rules to keep suppliers from doing things we thought were unfair. For example, recent changes to Public Utilities Commission rules bar competitive suppliers from many of the practices that are the subject of the recent class action lawsuit against the competitive supplier Electricity Maine. Thanks in part to close oversight by the Public Utilities Commission, Maine largely has been spared the abusive practices we’ve seen in other states, where suppliers have fraudulently posed as utility representatives and targeted seniors and low-income customers with teaser rates that doubled or tripled during the winter months.

But what did Mainers get for their $50 million in higher rates? Competition for electricity supply was supposed to unlock customer choice: Suppliers would offer consumers innovative, customized options that matched their preferences, say for renewable energy, or tailored to a customer’s usage pattern. This has been true for Maine’s larger commercial and industrial customers, who have used the competitive market and partnered with competitive suppliers to lower their prices and manage risk.

Options for residential and small-business customers have been more limited. Suppliers mostly offer simple, fixed rates with the required minimum percentages of renewables — a product essentially identical to the standard offer — often at a higher price. When the Public Utilities Commission hosted meetings to make sure new utility billing systems would support more innovative options, just one residential supplier actively participated. All of the “innovation” we’ve seen has been in getting customers — multilevel marketing, door-to-door sales — and keeping them — automatic renewals, termination fees. It’s tough to find any benefits that would justify Mainers paying millions more for electricity.

After nearly 20 years, it’s time to look at the results of Maine’s experiment with retail competition. An important first step would be to follow New York and Connecticut’s lead and use data from utilities to find out if competitive suppliers are actually saving residential and small-business customers money or offering them meaningful choice. If not, Maine should end the retail competition experiment for these customers.

Tim Schneider is the Maine public advocate. The Maine Office of the Public Advocate is an independent state agency that represents the interests of utility customers.

 



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