Consumers Will Need To Beware of High Electricity Rates In 2015
As Connecticut residents — who already pay some of the highest electric rates in the nation — brace for further increases in the new year, state officials and consumer advocates are urging them to be wary if they consider switching electricity suppliers.
With the state’s two electric utility companies, Connecticut Light & Power and United Illuminating, both planning rate hikes that take effect Jan. 1, “we expect to see increased marketing efforts by competitive electric suppliers,” said Connecticut Consumer Counsel Elin Swanson Katz.
Speaking at a press conference Tuesday at the Legislative Office Building, Katz and others warned customers to use caution when shopping around for cheaper electric rates. While there are savings to be had, she said, there also are dangers.
State law allows a competitive marketplace in which Connecticut customers can choose to use a third-party electricity supplier, other than UI or CL&P, to lower the generation portion of their electric bill.
Electric bills have two components: the generation charge, which represents the cost of the electricity, and the distribution charge, which is what it costs to have the electricity delivered. The generation charge makes up the bulk of consumers’ monthly electric bills.
Those who opt to buy power from a competitive supplier receive their electricity from that company and pay that company’s generation rates. The power, however, still needs to be delivered by either UI or CL&P, so consumers still have to pay UI or CLP’s distribution rates. Consumers who go with a competitive supplier still get their monthly bills from UI or CL&P; their chosen supplier is listed on their bill.
For many, the allure of lower generation charges is tempting. Connecticut customers pay more for their electricity than most others nationwide, according to data released last week by the U.S. Energy Information Administration (EIA).
In September, the most recent month for which data is available, Connecticut residents paid an average of 19.74 cents per kilowatt-hour, the highest rate in the nation after Hawaii, where residents pay 38.12 cents from high distribution costs to get power to the islands. Connecticut’s rate jumped from 17.94 cents per kilowatt-hour in September 2013.
Prices in Connecticut are on track to rise further. UI customers are slated to see their bills rise an average of $32.55 a month in the new year, while a draft decision issued by the state Public Utilities Regulatory Authority (PURA) Monday would allow CL&P raise prices an average of more than $25 dollars a month. A final decision on the CL&P rate case is due Dec. 17.
The sharp rise in electricity costs is based on natural gas pipeline constraints, Katz said. Natural gas is used to produce electricity, so natural gas costs increases affect power prices.
“We want people to aware of that and plan for that,” Katz said.
Still, those considering a competitive supplier need to be careful, she said.
“Make sure you are very educated about which supplier you are picking, the terms and conditions you are agreeing to sign up for, and when your rate ends,” she said.
Competitive suppliers can save consumers up to $16 a month compared with UI and CL&P rates, she added, but “if you choose the wrong supplier or you end up on a variable rate, you can pay as much as $65 more a month for energy.”
Connecticut has consumer protections in place, she said, including a state law that requires suppliers to be transparent about what they are charging and when their rates change, “but it still requires that consumers educate themselves.”
As they increase their marketing efforts to lure customers, power suppliers may “corner” consumers into contracts that end up costing more money in the long run, said Tom Swan, executive director of Connecticut Citizen Action Group.
The advocacy organization is urging consumers to research any company they are considering using and to explore various state programs that can help them conserve electricity and thereby reduce their bills.
“It (conservation) is the best way to save money in the short term and the long term,” Swan said.
Senior citizens and low-income households should be especially vigilant as they are most vulnerable when it comes to rising electricity costs, said John Erlingheuser, AARP-Connecticut’s advocacy director. They pay the largest share of their income toward utilities, he said.
Sen. Martin Looney, D-New Haven, urged consumers to voice their concerns about rising rates to PURA before the agency finalizes its CL&P rate decision on Dec. 17. He also said he expects rising electric costs to be a hot topic among lawmakers in the 2015 legislative session.
One of his senate colleagues is already trying to seek some relief for ratepayers. Sen. Bob Duff, D-Norwalk, was not at Tuesday’s press conference but on Monday said he plans to ask PURA to gradually phase in the CL&P rate increase.
“Spreading out such an increase in equal amounts over four years would provide ratepayers with time to plan for these expenses, and help to alleviate an abrupt and unexpected transition to new rates,” Duff said in a statement.