It makes no sense to eliminate competitive electricity markets
this past year Massachusetts has not been kind to electric ratepayers – at least to some of them.
For customers who don’t shop around and choose their own energy provider, the average residential rate increase in National Grid’s service area was more than $110 a month last winter, an increase of 64 percent. In Eversource’s service area, rates increased 42 percent. This was part of the largest electric rate increase in recent memory and marked the Commonwealth as having one of the highest “default” rates in the country – a term used for consumers who do not purchase electricity for electricity supply. We do.
Thankfully, there was a relief valve for customers facing this rate shock. Massachusetts allows electricity customers to shop for an alternative provider, and this winter all 32 residential competitive rate plans listed on energyswitchma.gov were cheaper than National Grid’s basic service rate. In fact, if all National Grid customers had purchased and contracted with even the average competitive offering last winter (let alone the cheapest one), those customers would have saved more than $329 million. If we include Eversource and Unitil, that’s a savings of almost a billion dollars.
These numbers are not imaginary. When all our customers entrusted us to be their supplier, they made a choice. Massachusetts residential customers of our largest brand, Direct Energy, have saved $15.4 million compared to utility pricing since December last year, when utility prices began to decline.
So you can understand why I’m scratching my head that Massachusetts is considering eliminating the competitive electric market entirely. If passed, the new law will take away your ability to shop around for cheaper electricity rates when you need more affordable energy options, not less.
Eliminating electricity competition will not help “deregulate” the market; This would tie everyone to the same monopoly wagon. Eliminating competition would mean fewer affordable options for customers struggling with higher costs due to the region’s reliance on natural gas. This would eliminate 100 percent renewable options for customers willing to pay a little more to support carbon reductions. This will stifle the innovations that will be possible now that utilities are finally investing in grid modernization. In short, it would be a big step in the wrong direction, at exactly the wrong time.
The move to eliminate customer choice is being driven, in part, by reports issued by the Massachusetts Attorney General’s Office. The cost savings we cited above are from last winter. In contrast, AG’s studies are older, the most recent being 2021. The whole ballgame is missing. Decisions should be based on the latest information, not years-old data from a world that looked very different.
Finally, there has been no increase in consumer complaints that would warrant consideration of stronger action by the legislature. The attorney general’s own data shows that the number of complaints filed against competing suppliers has dropped 77 percent from 2018 to 2022 and is on par with charges brought against the largest utilities.
However, there are ways to make the marketplace more consumer-friendly. Like any industry, bad actors in the competitive supply industry must be punished or removed. Licenses of questionable companies should be cancelled. It’s that simple. This may require additional enforcement efforts. A state office of retail market oversight, funded by competing suppliers, should be created, which would increase the ability to enforce regulations and provide greater transparency for consumers.
The law establishing a competitive electricity market has not been updated since it was passed more than 25 years ago. This is the time to amend the law, not to abolish it. Now is the time to improve consumer choice, not eliminate it. If we do this, we can protect Massachusetts consumers while still providing them with the choices they want and deserve.
Travis Kavulla is vice president of regulatory affairs at NRG Energy.
Source: commonwealthmagazine.org