Winter's high electric bills stun consumers
By Timothy Puko
Published: Friday, Feb. 21, 2014, 11:34 p.m.
Some consumers are receiving a shock from their electric bills.
Frigid temperatures this winter mean bills have doubled — or even tripled — for some consumers who spurned traditional electric utilities to find better options from power suppliers in the open market.
These consumers were locked into variable plans that fluctuated with wholesale electric prices. Those prices spiked as the extreme cold weather increased demand for electricity and gas used by power generators.
The problem highlights concerns about the state's deregulated system for electric consumers. The Public Utility Commission said it received more than 750 complaints this year about variable-rate plans that allow bills to go up and down from month to month.
Power companies that were allowed into the market under deregulation to spur competition and lower prices have been increasingly marketing these plans to consumers. Some people signed up directly for rates that could go up and down based on the market's whims. Others were switched automatically when their fixed-rate deal expired. Some consumers may have been unaware that they were on a variable plan or, if they were, didn't bargain on the sharp spike.
Some of these variable-rate plans jumped up to as much as 38 cents per kilowatt hour compared with 8 cents for people who stuck with their default utility company, according to the Pennsylvania Office of Consumer Advocate.
Victoria C. Rizzo signed up for a variable-rate plan because a telemarketer told her it would save her money, she said. After saving about $10 a month in the fall, the electric bill for her Port Vue bar went from $400 in December to $938 in January, even though she used less electricity, she said. She is switching back to her utility Duquesne Light Co., she said.
“Oh my god, it is terrible what they did. It's a fraud. It's a scam,” said Rizzo, who has owned Vicki's Place for 20 years. “I tell you what, I won't switch again.”
Tanya McCloskey, the state's Acting Consumer Advocate, said variable-rate plans may be useful for some people, but it's not clear that electric providers are following the rules to explain their pitfalls to new customers, or if the state's rules offer enough protection.
“I have a lot of sympathy for these customers,” McCloskey said. “I don't think any of the disclosures informed customers that their bills could go up 300 or 400 percent in one month. ... They could have done all the research in the world and not found that out.”
Pennsylvania opened its electric markets to competition in 1997 and drew in more electric supply companies by ending rate caps in 2010, according to the PUC. But most of the state's consumers, about 3.4 million, still buy from utility companies, which charge rates that are frozen for long periods and regulated by the commission.
About 2.2 million customers buy service from the deregulated suppliers, but it is unknown how many of them have variable-rate plans. The PUC does not keep a tally.
The commission on Friday started to investigate some of those suppliers that offer the variable-rate plans after it received complaints. It said the number of people affected could be a lot higher than the complaints it received.
For weeks the PUC has been warning consumers to review their contracts as record winter demand pushed up power prices on the wholesale market.
Despite the high prices, Rizzo's plan could still be cheaper in the long-run, said Bill Ulrey, spokesman at Rizzo's electric supplier, IDT Energy, a subsidiary of New Jersey-based Genie Energy Ltd. If the weather keeps improving, IDT rates will start to come down while some other electric companies may have to raise bills to recoup costs from the winter, Ulrey wrote in an email.
There are 19 companies offering variable-rate plans in the Pittsburgh area, including subsidiaries of some of the region's biggest energy companies, NRG Energy Inc. and U.S. Gas & Electric. The lowest price is 5.6 cents per kilowatt hour, and IDT has the highest at 13.9 cents per kilowatt hour. The local utility, Duquesne Light, charges 6.6 cents per kilowatt hour, according to the state-run website PAPowerSwitch.com.
“We have insulated our customers as best we could by not passing all the wholesale cost increases along — unlike some suppliers which have raised their rates to over 40 cents per kilowatt hour,” Ulrey added.
There's no limit on how much of the wholesale cost spikes these companies can pass along to their customers, the consumer advocate McCloskey said. They do have to disclose their formula for setting prices to their consumers, but those disclosure statements are not always clear, she added. She has seen a few without any of that information, she said.
The PUC started its investigation by telling companies to submit all of their disclosure statements for a review.
Timothy Puko is a Trib Total Media staff writer. Reach him at 412-320-7991 or email@example.com.
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