Electricity market brings choices, deals — and scams

James Malaro Jr. bought electricity from a company other than his utility for the first time last fall. The deal quickly went bad.

The Centreville man hadn't realized it, but the money-saving rate he'd been quoted was variable, not fixed. It more than doubled during the winter.


As more customers and companies jump into Maryland's electricity-purchase market, reports of problems and outright scams are mounting. Maryland's Public Service Commission has seen a more than 50 percent spike in complaints about energy suppliers this year compared with all of last year, including so many about Starion Energy — the company that increased Malaro's rate — that it launched an investigation into the Connecticut firm.

But the options for getting a good deal on power are rising, too. Malaro stuck with it: State regulators got him a refund, and he switched to a supplier with a two-year rate guarantee that's saving him some money.


"I think deregulation's a good idea," said Malaro, a retired Nuclear Regulatory Commission employee. "The mistake was actually mine, for not looking into it. I said, 'Wow, I'm going to save a penny per kilowatt hour, sign me up.' ... Once I had that experience, I knew enough to ask the right question, and that is: How long is this rate going to last?"

Maryland's "electric choice" market is the result of the state's 1999 deregulation law, which separated energy generation from delivery and set the stage for customers to shop for their power. Incumbent utilities still deliver electricity, regardless of where customers buy that energy, and they remain the default supplier for those who haven't switched.

Most Marylanders haven't. But the number shopping for electricity is rising sharply after years in which no more than 5 percent of customers used third-party suppliers.

As of July, 28 percent of customers at the state's four largest electric utilities were buying from suppliers, according to the most recent data from the Maryland Public Service Commission. That's up from 24 percent a year ago and 20 percent the year before that.

Part of the story is more options.

For the first five years that Marylanders could shop around, there wasn't much choice in "electric choice" — only one supplier sold to Baltimore Gas and Electric Co.'s residential customers aside from the utility. Companies complained that the settlement agreement between BGE and regulators over deregulation, which initially cut and froze BGE's rates, effectively insulated the utility from real competition for several years.

Now BGE's residential customers have 49 companies to pick from — triple the options of just three years ago.

With more competition have come websites aimed at helping people sort through it all, firms that think of themselves as the energy version of travel sites like Expedia.


"When states hit about a 35 percent penetration rate, there's almost a tipping point," said John Tough, director of business development for Choose Energy, which made Maryland its eighth state a few weeks ago. "Choice becomes more well known; people are more willing to talk about it and accept it."

Choose Energy, which faces locally based competitors such as ClearlyEnergy and, says its plan is to get everyone in Maryland shopping within three to five years.

"We want to bring the choice market to the masses," said Jay Webster, president of the Texas company.

Maryland's electricity market restructuring in 1999 was pitched as a way to drive down costs for consumers. Those who remember their rates back then might not see it as a big success: BGE customers have paid more for their energy alone in each of the past six years than for the combined cost of energy and all the infrastructure to deliver it 14 years ago.

Bob Barkanic, chairman of the Retail Energy Supply Association's electric market region of Maryland, Delaware and the District of Columbia, blames higher commodity costs, not the market structure. RESA notes that natural gas prices — and electricity rates — have trended down after spiking in the mid-2000s.

The fairer comparison is between the rates charged now by suppliers and utilities, Barkanic said.


"Customers continue to be able to save a lot of money by shopping," said Barkanic, senior director of energy policy for supplier PPL EnergyPlus.

BGE's energy supply charge is 9.623 cents per kilowatt hour through May 31. ClearlyEnergy, an Annapolis-based online comparison site, estimated that a full 12 months with BGE will come to 9.69 cents per kilowatt hour.

The most competitive suppliers are offering one-year contracts for under 8.6 cents. One 8.15-cent offer would save a family of four living in a 2,000-square-foot house with electric heat more than $270 a year, ClearlyEnergy estimated.

Or you could buy electricity generated from renewable energy sources and — for the best deal — pay what BGE would charge you for standard power from the grid, ClearlyEnergy said. The company notes whether the deals come with an early termination fee if you want out before the contract expires.

"What we've tried to do is say, this is a financial decision or an environmental decision for people," said Veronique Bugnion, ClearlyEnergy's co-founder and a former Constellation Energy commodities specialist. "In either case, they should make it with eyes wide open."

Bugnion said there's a bigger difference between BGE's price and that of its competition than between other Maryland utilities and their competition, meaning that BGE customers who haven't switched are forgoing more potential savings. BGE's switch rate is higher than the state's overall, at 31 percent — more than 390,000 customers.


But many more have stuck with the default rate, and it's not for lack of knowledge that they can shop around.

"We've done some surveys, and over 95 percent of our customers know that electric choice exists," said Laurie Duhan, BGE's manager of energy services.

She suspects some take the "why bother?" tack, or feel that switching would be disloyal, even though BGE doesn't see it that way.

"We're encouraging this ... because it is a positive opportunity for customers," Duhan said.

But as the market expands, so have some consumers' frustrations. Marylanders have filed more than 1,000 energy-supplier complaints with the Public Service Commission this year, several hundred more than in all of 2012.

The most common problem, after billing disputes, was "slamming" — providers switching customers without their consent. Some consumers said sales reps asked for their electric-choice ID number and then used that to switch them, despite never getting an OK.


"Do not give out that number," said Marilyn Marshall, a Towson resident who said a supplier's sales rep called her in March and pressed her to reveal it. (She didn't.)

Consumers filed more complaints about Starion Energy than any other firm, citing problems that include spiking rates and slamming. The commission is in the midst of a case against the company after ordering it to show why it shouldn't be fined or lose its license.

The Maryland Office of People's Counsel, charged with representing residential utility customers, contends that Starion continuously violated consumer-protection laws.

Starion said it does not comment on pending cases. But in a recent filing, it characterized its "errors" as the growing pains of a startup firm rather than intentional violations, and said it satisfied customers who complained to regulators.

"Starion urges the Commission to recognize that it has made tremendous changes in the last year to improve processes, is on track to demonstrate comprehensive compliance, and desires to provide service to Maryland consumers that meets the highest standards," the company said in its filing.

Tammy Bresnahan, associate state director of advocacy for AARP Maryland, which represents the interests of older residents, thinks the retail market is in a Wild West period. She's concerned that it's easy for consumers to get taken advantage of.


Early termination fees, for instance, can run into the hundreds of dollars — a fact that some customers don't realize until after they've been hit.

"The troubling thing is that when they fall behind with these companies, then they become in arrears and their electricity can be turned off," Bresnahan said.

Paula M. Carmody, who heads the Office of People's Counsel, called the retail market "a mixed bag" for consumers, even setting aside bad actors. Some of the supplier prices are lower. But some are higher — and that includes regular, nongreen power.

"I'm not convinced that ... this has delivered lower prices overall to our customers," she said.

Marshall, a retired physical therapist, doesn't have a negative impression of the retail market, despite her brush with a possible slammer. Still, she's not planning to buy electricity from anyone but BGE. It doesn't seem worth it to her.

"I live in a small, one-bedroom apartment in a senior building," she said, "and I just figured it wasn't going to save me that much to switch."


If you switch

Thinking of buying electricity from a third-party supplier rather than your utility? Here's what consumer advocates recommend:

Get it in writing. Don't agree to a deal until you see the terms.

Decide how long to lock in. Some contracts have rates that are fixed for a while, such as a year; others vary. Some month-to-month customers have complained of spikes in their rates, so keep that risk in mind.


Beware of early-termination fees. Many companies charge you if you cancel before the contract ends. Some of those fees are hefty — $150 or more. Account for any such fees if you're thinking of leaving early for a better offer.

Watch out for automatic renewal. Mark your calendar. The new rate might not be so competitive.

Protect yourself from "slamming." Don't reveal your electric-choice ID number, located on the back of BGE bills, unless you're definitely going to buy energy from the company in question. Customers have complained of firms switching them without permission.

Check out the energy. You can shop for the power you want, not just the price. Some suppliers offer electricity that's partly or entirely generated by solar, wind or other renewable sources — and some of that "green" energy is priced on par with utility rates.