Electric deals abound, but beware of ads

The newest batch of electricity alternatives to Baltimore Gas and Electric Co.'s standard product are as confusing as ever and continue to be misleadingly advertised, despite attempts at reform by the Public Service Commission. Lower in the column I'll get into why the PSC should clamp down.

But first some advice.

Once you cut through the haze, the latest deals are the cheapest since Maryland household electricity was fully deregulated several years ago. One in particular is a good choice, provided you pay attention when the contract expires.

The best widely available offer for BGE households, if you haven't already signed with a third-party supplier, is the one-year option from Washington Gas Energy Services of 9.2 cents per kilowatt hour. That's about 10 percent off BGE's standard electricity price over the next 12 months and will save a typical household more than $100 during the period.

(All prices quoted here are BGE's "electric supply" charge and include the cost of generating the electricity and cross-country transmission. Local delivery is an additional 2.4 cents or so.)

Don't lock in for longer than one year if you haven't already done so.

Even though electricity sellers tell you that two- or three-year deals insure against the risk of soaring prices in 2011 or 2012, there is in fact little risk. That's because BGE has already bought up much of its future electricity supply at today's relatively low rates.

BGE's standard price from October 2011 through May 2012 is likely to be less than 9 cents an hour, says Mark Case, senior vice president for strategy and regulation. So why sign up for, say, Constellation Electric's two-year offer of 9.45 cents per kilowatt hour?

You can beat 9.45 cents with WGES now. (Direct Energy has a similarly priced deal, but only through May.) If for some reason (another Hurricane Katrina?) wholesale electricity prices soar next fall, you can always dump WGES when the contract expires and go back to BGE's standard offer.

And if there is no Katrina II the wholesale market may continue to fall and you can shop for an even better deal -- with WGES or somebody else. Either way, the one-year contract gives you the flexibility to choose without paying expensive early-termination fees.

More than a tenth of BGE's 1.1 million residential electricity customers have switched to WGES, Direct Energy or some other alternative supplier. Kilowatt shopping was made possible by electricity deregulation, but only recently has Maryland's 1999 "Electric Customer Choice" act lived up to its name.

Deregulation was first marked by artificially low caps on BGE's standard price that were impossible for competitors to beat. When the caps expired for BGE customers in 2006, energy prices were soaring and households got nailed with increases of 70 percent and more.

At the height of the energy bubble in 2008, households using BGE's standard product were paying more than 12 cents per kilowatt hour for generation and transmission.

The recession, however, let the air out of energy prices, although BGE customers are still paying far more than they did before deregulation. From this month through May, BGE's standard price for generation and transmission is down to 10.08 cents. It's likely to stay at about that level next summer, based on supply BGE has already locked up.

So how can independent supplier Constellation Electric get away with junk mail and advertising saying that its price of 9.45 cents is "12 percent lower" than BGE's offer? Of course 9.45 cents is only 6.3 percent less than BGE's 10.08 cents.

Constellation Electric is affiliated with BGE Home, both of which are owned by BGE parent Constellation Energy but separate from BGE. To get the "12 percent lower" quote, it turns out, Constellation Electric used a comparison formula devised by the PSC that blends last summer's high BGE price along with one month of the new, 10.08-cent rate.

As I said, confusing. Basically Constellation Electric is the latest Maryland vendor to sell future electricity based on old comparison prices.

The Constellation Electric ads include BGE's current price in the fine print, notes spokesman Aaron Koos. And they conform to the PSC's latest requirements for publishing a "price to compare," he says.

In that case, the PSC needs to do some more work. Vendors shouldn't be allowed to hawk kilowatts against yesterday's price. If energy ads continue to be this misleading, the PSC should review them before they're aimed at the public.

The commission might be open to setting up a process for doing that, PSC Chairman Doug Nazarian said in an interview.

Footnotes and caveats: If you sign with WGES or any other alternative supplier, note in your calendar when the deal expires. I can't emphasize this enough. If you don't opt out, these companies roll you over to their latest deal, which may not be any good. They're supposed to notify you when the contract expires, but customers often fail to notice.

Don't overlook the wind energy deals offered by Constellation Electric, WGES and others. They're more expensive than basic electricity, and they generally don't rely on local wind generators. But they do deliver subsidies to wind generation elsewhere in the country.

Viridian Energy and others offer rates that vary from month to month. Without a guaranteed price, I would be wary of signing.

The Maryland Office of People's Counsel (opc.state.md.us) usually has the best chart showing residential electricity offers. There are deals to be had. But as with buying anything, you have to invest time and attention to save money. Especially when the advertising is fictitious.


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