End auto-renewed third party electric contracts

AARP has worked for over a decade to address and rectify the fraud, misleading advertising and unscrupulous practices that has plagued and undermined Connecticut’s deregulated third-party electric market place. This has frequently resembled a game of whack-a-mole with a new scheme or trick popping up every time AARP and other consumer advocates knock down a deceptive supplier tactic through legislation or a Public Utilities Regulatory Authority ruling.

Even when consumers are able to avoid the dishonest suppliers, they often end up losing overall. The structure of Connecticut’s third-party electric market rarely allows ratepayers to make apples-to-apples contract comparisons. Take for example, the non-coterminous contracts of the typical supplier and the regulated standard offer.  The standard offer rate – which utilities do not profit from – is a fixed price that only changes twice per year, January 1 and July 1, while a third-party electric supply contract can have an unlimited duration at  a minimum of four-month increments. Therefore, these ratepayers are not empowered with the information to make decisions based on what the standard service rate will be during the length of their contracts.

So today’s deal can frequently be tomorrow’s costly mistake that eats up any previous savings. According to an analysis by the Office of the Consumer Counsel, Elin Katz, over the past three years ratepayers using third-party suppliers versus the standard offer supply have spent over $200 million more.

In fact, AARP worked with the Connecticut legislature to ban variable rate electric contracts in 2015, yet there are still more than 31,000 residential consumers on variable rate contracts.  These are customers who had a variable rate contract that was “grandfathered” in and continue to be auto-renewed. The current law allows suppliers to automatically renew your contract, often at a much higher rate than the standard offer, without your affirmed consent in writing or electronically.

Suppliers will claim that ratepayers are notified with the new terms when their contract expires and before it goes into effect.  This may be, but many people either miss the notice, do not understand it, or are away when the renewal notice comes.  Suppliers will say, buyer beware.  Much like food and medicine, electricity is a necessity and buyer beware is not an appropriate standard.

Despite Strong PURA enforcement of consumer protections, harm is still rampant.  Below is a list of some Connecticut Regulatory Proceedings:

• Energy Plus: $4.5M Settlement, PURA Decision, June 11, 2014
• North American Power: $2.6M Settlement, PURA Decision, Oct. 28, 2015
• Public Power: $13k Civil Penalty, PURA Decision, Jan. 20, 2016
• Palmco Power: $5M Settlement & 5-year Stay-out, PURA Decision, Aug. 16, 2017
• Spark Energy, $900k Civil Penalty (pending), PURA Notice of Violation, Mar. 21, 2018
• Choice Energy: $250k Civil Penalty, PURA Decision, June 13, 2018
• Liberty Power: $57,475 Civil Penalty, PURA Decision, July 2, 2018
• Spark Energy, $750k Civil Penalty (pending), PURA Notice of Violation, Sept. 5, 2018
• Direct Energy: $1.5M Civil Penalty, PURA Decision, May 1, 2019
• Liberty Power: $1.5M Civil Penalty (pending), PURA Notice of Violation, Sept. 12, 2018

After nearly two decades of implementing legislative and regulatory policies meant to protect ratepayers, it is time to tell third-party suppliers that this is their last chance to clean up their act.  We need to pass House Bill 7155, AAC Consumer Protections for Customers of Electric Suppliers, with the strong language that requires a ratepayer to affirmatively consent to new contract terms before that contract is valid or they return to standard offer service.

John Erlingheuser is Advocacy Director for AARP Connecticut in Derby.

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