AARP Maine is calling on the state Legislature to end the failed electricity market experiment and thereby terminate the option that allows for profit-driven marketers with complex and confusing contracts to prey on Maine’s utility customers. The simple fact is that retail energy marketers have been selling overly expensive electricity to residential customers, and it is time for this to stop.
A recent report by the Maine Office of the Public Advocate recommends the repeal of the competitive electric provider program adopted in 2000. That program ended local utilities’ ownership of electric generation resources and allowed retail electricity marketers to compete for residential customers. AARP Maine strongly agrees with the recommendation that the program cease.
Indeed, today only 10% of residential customers have elected an alternative supplier. Instead, 90% of Maine’s residential customers are served by the standard offer that is purchased by the Maine Public Utilities Commission in the wholesale market. These retail suppliers usually charge more and don’t offer additional services worth their high prices.
Relying on retail electricity suppliers to provide essential electric service has been a failure. Every study conducted on these restructured rate schemes has found that these companies charge higher prices than the utility standard offer rate over a reasonable time period.
The analysis conducted by the Maine Office of the Public Advocate found that “residential consumers pay approximately $20 million above standard offer rates each year in order to buy an essential product.” Even more disturbing, “in Central Maine Power’s region, low-income consumers are almost 50 percent more likely to purchase from (alternative energy marketers) than are other consumers.” This means that the programs designed to provide benefits to low-income ratepayers cost even more to make the bill affordable.
There have been other problems as well because of unscrupulous power marketers. Many customers have experienced energy sellers charging a lower rate for a “promotional” period and then increasing the rate. For example, according to a recent news report, one supplier started charging customers almost 40 cents per kilowatt-hour, compared to the standard offer rate of slightly over 17 cents per kWh (resulting in bill increases of over $100). That action is now under investigation by the Maine Public Utilities Commission.
These higher prices and more costly electric bills are not a surprise since these retail suppliers generally only operate as middlemen by purchasing power in the wholesale market. They then include their sales and marketing costs, as well as a profit, in the monthly bills charged to consumers. The marketers do not generally build or own their own generation to provide the power. It is common knowledge that having a middleman usually increases the overall costs to consumers.
Unfortunately, this so-called competitive power supply market has often resulted in higher rates than the utility standard offer rates. This particularly has an impact on older Maine residents and their families, many of whom are unable to pay for their food and medicine while struggling with these rising utility bills. This alternative utility electricity market experiment is simply unfair to Maine’s ratepayers.
AARP Maine is calling on the Legislature to act on the Maine Office of the Public Advocate’s recommendations and repeal the alternative option for residential customers. This 24-year effort has been a colossal failure and it is time to end this policy once and for all.
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