Lawmakers Seek To Ban Variable Rate Electricity Contracts
Lawmakers signaled Tuesday they would revisit the controversial third-party electricity supplier market and seek to ban variable rates in residential electricity contracts.
It will be the second consecutive year the legislature aims to address consumer complaints about third-party suppliers, who they say attract customers with deceptively low teaser rates that quickly expire and leave consumers open to paying variable rates well above the standard rate available from a utility company.
At a Tuesday press conference in the Legislative Office Building, Senate President Martin Looney said some suppliers have used the variable rate to extract “unconscionably high profits” from consumers.
“Electric customers really deserve more stable, predictable electric rates, whether obtained through a standard offer service or from a multitude of highly competitive offers in the private supplier marketplace,” Looney said.
Last year, lawmakers negotiated and unanimously adopted rules designed to give customers more information about their bills and greater flexibility to leave their contracts.
Rep. Lonnie Reed, co-chairwoman of the legislature’s Energy and Technology Committee, said she helped negotiate last year’s bill, which didn’t put limitations on variable rates despite calls to cap the rates from the Connecticut chapter of the AARP. Reed said policymakers opted to allow savvy consumers the option of weighing market forces to choose the best rate.
“We thought we had enough options to protect them, but the reality is that nobody can predict market forces,” Reed said.
Even when market forces seem favorable to consumers, third-party suppliers may be charging more than the standard electricity rate. Consumer Counsel Elin Katz said her office surveyed variable electricity rates during the final quarter of last year and found 15 suppliers with variable rates more than 30 percent above the standard rate. That was during a moderate season between summer and winter as fuel prices were falling.
“It’s simply unconscionable that a consumer would be paying twice or more for energy, when market conditions are lowest, under a variable rate plan. To me that says variable rates have no value to consumers,” Katz said.
Katz said the industry has indicated it can’t comply with a July 1 requirement in last year’s bill that calls for suppliers to inform customers of their variable rates a month ahead of time.
“The industry including the electric suppliers and the utilities are saying they can’t do it. They can’t do it on time, and in fact they say they can’t do it at all. I say, if you cannot provide the basic level of consumer protection ... then there is no business having these rates be available to consumers,” she said.
AARP advocacy director John Erlingheuser said his organization has pushed to cap variable rates because they often are applied to vulnerable consumers without their knowledge.
“It’s generally low-income, disabled, elderly people that fall prey to these contracts,” he said. “The majority of people are into it because their contracts expired, they missed the notice, and they default into a variable rate contract.”
In written testimony submitted during a Tuesday public hearing, John Holtz, director of regulatory affairs for Pennsylvania-based NRG Retail, opposed the ban. Holtz wrote that Connecticut consumers are not required to shop on the third-party market and should be free to choose the electricity plan that benefits them.
“The General Assembly does not legislate how many channels cable customers may subscribe to, or what hours or days of the week smartphone customers can use their data plans. Likewise, electric customers should not be limited as to the pricing plans from which they can choose,” he wrote.