Energy Overseers: Time to stop harm to electric consumers

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BOSTON (SHNS) – Attorney General Maura Healey and the Baker administration teamed up Wednesday to call for the end of the competitive market for residential electricity consumers as it currently exists, and the chairs of a key legislative committee suggested they agree.

Electric customers in Massachusetts who switched to a competitive electric supplier paid $426 million more than they would have had they stayed with their utility company from July 2015 to June 2020, Healey’s office said this spring in its third report on the topic.

Healey, Energy and Environmental Affairs Secretary Kathleen Theoharides, Department of Public Utilities Chairman Matthew Nelson, Sen. Brendan Crighton and Rep. Frank Moran pitched legislation (S 2150/H 3352) that would ban competitive electric suppliers from signing up new individual residential customers in Massachusetts.

“I know it is a big deal for us to call for the banning of an industry. I don’t make that call lightly, but I make that call based on the documented data, as well as the anecdotes, but more importantly the data that we have studied that show why this industry is harming our residents,” Healey told the Joint Committee on Telecommunications, Utilities and Energy.

About 450,000 Massachusetts residents get their electricity from a competitive supplier, an option created under a 1997 law that deregulated the state’s electricity generation industry.

“It’s clear that individual competitive supply market for residential customers has not delivered on its promise of lower rates for residential customers … In fact, the evidence shows that it has increased rates, particularly for the state’s most vulnerable residents and is causing them undeniable harm,” Theoharides said. “We believe at this juncture that the market cannot continue as currently structured and not until there’s a stronger framework in place that protects our most vulnerable residents from the predatory tactics so widespread in the current competitive supply market.”

The secretary later added, “I can’t sit here today and tell you that this industry brings any benefit to residential customers.”

Arguing that the industry has preyed upon elderly and low-income residents for too long with aggressive and deceptive practices, Healey’s report found that “the annual consumer loss for low-income participants is $241, which is 24 percent higher than the annual consumer loss of $194 for non-low-income participants,” assuming an average monthly usage of 600 kWh across both income groups.

Healey said that the executive branch investigations of the competitive electric supply market, combined with her own, “show that this is a broken industry that’s just not capable of following the law that continues to drain funds by deceiving Massachusetts residential customers.”

Sen. Michael Barrett, the committee co-chair, said that the findings presented by the attorney general and executive branch “really raise serious questions for those who would argue that we continue with current practice.”

“This is not the first session in which she’s raised these issues. As time has gone on, both sides have had an opportunity to be heard and it’s probably time — just expressing a personal opinion — that we act on this question since all sides have been given an opportunity in the past sessions to make their points and to offer their perspectives,” Barrett said.

Rep. Jeff Roy, the House co-chair of the committee, said he has heard about the issues with the competitive electric supply market from various people, “including some of the responsible competitive suppliers who take exception to what they see happening out in this industry too.”

Barrett said that he previously heard the argument “that this was, in fact, a bad apples problem, that there was something fundamentally sound about direct to consumer sales and that this fundamentally sound model was being abused by a few bad actors.” But that argument was dismissed Wednesday by Nelson and officials from Healey’s office.

“There are no good apples,” Liz Anderson, deputy chief of the attorney general’s Energy and Telecommunications Division, told lawmakers. “There is no supplier who is able to consistently provide their customers with lower-priced electricity rates.”

Officials from the Retail Energy Supply Association insisted Wednesday that their industry has benefits.

“Clearly, there is a problem in the commonwealth and it’s gotten pretty far. But the question really is, reform it or just throw it out, close the market down? I’ve heard a lot of people say, ‘well, we just have to close this down.’ I’m not going to pretend that reforming enforcement and dealing with issues of suppliers that shouldn’t be licensed, that shouldn’t be allowed to engage in deceptive practices, is easy … But if you close the market down, you’re making a lot of assumptions about things that won’t change,” Dan Allegretti, a consultant who works with RESA, said. “You’re assuming that the way that basic service is provided won’t change, that the cost savings that have been enormous as a result of wholesale competition are not going to change, that utilities will not have new stranded costs in providing that service.”

Jennifer Spinosi, general counsel at CleanChoice Energy, argued that giving customers a choice when it comes to their supply of electricity will help the state meet its goal of achieving net-zero carbon emissions by 2050.

“Massachusetts has really aggressive renewable energy and carbon emission reduction goals. We believe a direct choice competitive market should be maintained in order to continue to empower customers to cut emissions and choose clean energy when they want to make an informed choice,” she said.

Theoharides told lawmakers during Wednesday’s hearing that while the Baker administration supports the legislation that would bring an end to new competitive electricity supply sign-ups, it has not completely written it off as a possible part of the state’s overall supply mix.

“It’s not that we don’t think individual residential competitive supply could exist and could be structured to exist and potentially benefit customers and ratepayers, and particularly as we move forward with electrification and advanced metering and all of these things, it’s likely to play a role,” she said. “But we feel very strongly that given the lack of benefits we’re seeing and the significant impacts that we’re seeing, particularly to low-income ratepayers, we have to stop it now before moving forward and looking at what the future could bring.”

And though she said her office has received more than 1,000 complaints about competitive electric suppliers, Healey also pointed out that commercial electric customers might benefit from competition in the supply market because “commercial customers have access to expertise when purchasing electric supply and have greater negotiating power than an individual residential consumer.”

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