DECATUR — A new survey analyzing the deregulated electricity market in Illinois is drawing some negative conclusions.
The Citizens Utility Board consumer watchdog group came up with a catalog of problems, ranging from long-term worries about whether impressive savings being achieved today will stand the test of time to questionable sales pitches to consumers and a general lack of product innovation.
The Retail Energy Supply Association, an industry group for nonutility power suppliers, responded Tuesday to the CUB survey by saying its members followed strict guidelines for “good marketing practices,” and said it welcomed efforts to rein in “any bad actors” who give the power industry a bad name.
The association also highlighted the impressive level of savings being enjoyed by customers who switched away from the cost of power supplied by utilities such Ameren Illinois when competitive suppliers surged into the Illinois power market beginning around 2007.
CUB ranked the level of these savings, which were estimated statewide from $92 million to more than $200 million in 2012, as worth an “A-” in its survey. It said the savings have been especially impressive in towns that opted for municipal aggregation (as Decatur did in the November election), allowing residents to be marketed as a block to competitive energy companies.
Overall, customers who switched have averaged a rate of 4.08 cents per kilowatt hour in the service territory of Ameren Illinois, compared to the default power cost offered by the utility of about 5.4 cents per kilowatt hour. Since 2010, 1.7 million Illinois consumers have fled from traditional utility service and most switched over in 2012 when the numbers jumped a staggering 562 percent, figures CUB said were “unmatched in the nation.” Much of the 2012 increase was fueled by more than 460 communities voting for municipal aggregation programs.
But the power landscape is set to change again. CUB said long-term contracts that have made utility rates higher compared to nonutility suppliers are due to end June 1, prompting an expected drop in power prices. Decatur customers are covered, however, as a provision in their contract states that their power rate will be changed to match the Ameren Illinois cost of electricity if this falls below what they are paying, or they’ll be switched back to the utility for free.
CUB pointed out, however, that not all consumers are so lucky, particularly those who signed private deals with alternative power suppliers.
“Because of the expected drop in utility prices, CUB is concerned that many offers it is tracking charge ‘termination fees’ of up to $175 if customers want to exit a contract early,” it said in a statement. CUB gave consumer protections in the deregulated market a “C” rating overall.
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It also warned families to be on their guard because nonutility power companies chasing a dwindling pool of potential customers could be tempted to step up the use of questionable tactics to win new accounts.
CUB cited examples of power marketers claiming to be from “the electric company,” meaning the local utility, as they tried to talk people into switching their service. It also accused some marketers of making promises they couldn’t keep, such as protecting clients from “utility rate hikes” when the costs the utility charges to deliver power to homes and businesses, as opposed to the cost of the power itself, are paid by all consumers and increase regularly.
“Illinois consumers should be on alert,” said David Kolata, CUB’s executive director. “Conditions could be ripe for rip-offs.”
CUB reserved its lowest segment grade, “D-,” for the failure to innovate among the nonutility companies. Given its belief that utility prices are set to fall, CUB said a more sustainable competitive model would focus on promoting energy efficient and money-saving technologies, along with alternative pricing models that take advantage of fluctuating power rates.
Summing up by giving the power companies an overall grade of “incomplete” because so much more needs to be done, CUB said none of them have introduced any creative billing models and continue to compete solely on their current price advantage.
The Retail Energy Supply Association said those kinds of innovations are waiting in the wings, but they require certain basic infrastructure to be in place first, such as “smart” electricity meters, which open up more services to customers. In other states that are further down the competitive road than Illinois, the association said consumer incentives range from half off and free power days to frequent-flier miles.
Roy Boston, the Illinois state chairman of the association, said more competitive options were on their way for Land of Lincoln families and businesses.
“As the Illinois market matures and the installation of smart meters increases, RESA expects customers to benefit not just from lower prices, but from competition-driven product innovation that will make a wide array of value-added products and services available to customers,” Boston said.