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Making It Easier for Consumers to Comparison Shop for Electricity

Trade group looks to revise "price-to-compare" system that helps customers make informed choices about independent power suppliers.

With residential customers finally switching electricity suppliers, a trade group representing independent power companies is hoping the state revamps billing and other procedures to make it easier for consumers to shop for a cheaper energy.

For the first time since the state broke up its electric monopolies more than a decade ago, residential customers and small commercial operations have some choices about who supplies the power to light their homes and businesses.

Because of a steep drop in natural gas prices and the way the state buys electricity, independent power suppliers have an opportunity to undercut the price that public utilities offer customers.

"The big story on the retail electricity side has been the emergence of residential and small commercial markets," agreed Jay Kooper, New Jersey state chair of the Retail Energy Suppliers Association, a trade group representing so-called Third-Party Suppliers (TPS).

Falling Prices

Until natural gas prices fell, more than 99 percent of residential customers elected to stay with their incumbent electric utility to buy their power, a fact that generated criticism of the state’s deregulation law. Other power suppliers found it hard to beat the price of the incumbents, in part because fuel costs had been rising and the state mitigated those spikes by buying power in chunks over three years, which tended to moderate those increases.

But when natural gas prices began falling more than a year ago, suppliers could undercut the price offered by the state, with some offering price discounts of up to 15 percent on the supply portion of customers' bills. Nearly 100,000 customers have switched as of November, according to the most recent data compiled by the state Board of Public Utilities (BPU).

With customers looking around for options, the big question for third-party suppliers is how do they sustain the business, especially if natural gas prices begin rising.

To Kooper, the answer is to revamp the state’s policies in two key areas: how to deal with customers who fall behind in their bills and owe the third-party suppliers money and the so-called price-to-compare, a mechanism set up by the state to help customers shop for new suppliers.

"We need to dive into the nuts and bolts of the retail market to keep it sustainable for the long term," Kooper said, noting the changes his group is seeking have already been adopted in other states with deregulated energy markets.

Gaining Momentum

Board of Public Utilities President Lee Solomon, who ordered the stakeholder hearings on the issue, said he is trying to take advantage of the momentum created by new suppliers coming into the market and make it easier for them to compete with the incumbents.

Without changes, Kooper said the suppliers will be subject to a "boom and bust" cycle when natural gas prices rise as they most inevitably will. What the suppliers are seeking is a level playing field to compete with the utilities, he said.

Along those lines, the group is advocating requiring the utilities to purchase the suppliers' account receivables, or unpaid customer bills. Kooper argued such a change would be fair because utilities are already are protected from uncollected bills by a surcharge, which allows them to pay off those bills.

The group is also seeking to establish a uniform price-to-compare system because each of the four utilities uses a different scheme to help customers compare prices, according to Murray Bevan, counsel to the group.

"As retail markets evolve, it’s very important that price-to-compare is as close to an apples-to-apples comparison as possible," Kooper said. "Without these mechanisms, it makes access to the smaller customers trickier and riskier."

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