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New Jersey Consumers Can Choose Cheaper Power

With some 50 suppliers out to make deals, it's no wonder that more than 250,000 electric customers have already switched power companies.

For the first time in a decade, there are options for customers looking to cut their electricity bills, a trend retail energy suppliers hope will spur the state to make it easier for ratepayers to switch power companies.

More than 250,000 electric customers have chosen to seek cheaper or greener deals than the one offered by their electric utility, with approximately 50 different suppliers vying for their business. The vast majority (184,063) of those customers are homeowners, who probably have double the number of suppliers to choose from than just a year or two ago, according to Murray Bevan, counsel to the Retail Energy Supply Association. In November, about 100,00 residential customers had switched.

Still, members of the trade organization are pressing the state Board of Public Utilities (BPU) to revamp key aspects of the rules governing how ratepayers may choose to switch suppliers. But even they concede their top challenge is educating consumers to the fact that they actually have options in how they purchase electricity.

Residential Rate

In New Jersey, even with customers switching at a far greater rate than in the past, only 5.5 percent of residential ratepayers have made the move. This percentage lags other states that have also deregulated the energy sector. Switching rates increase the more energy used by a customer. For instance, nearly 16 percent of small commercial and industrial customers, typically hardware or grocery stores, have switched.

More than 70 percent of larger commercial and industrial customers, such as pharmaceuticals and manufacturers, which use a lot of energy, have switched, according to BPU data as of January. These customers tend to shop around more because, unlike residential and small commercial customers, their prices are based on real-time electricity costs, which tend to spike in the summer when demand is highest. Prices are fixed for residential and small commercial customers in annual auctions held by the state’s four electric utilities.

"We have seen customers, both large and small, able to achieve savings that otherwise they would not have received if there had not been choice," said Jay Kooper, New Jersey state chair of the retail association, a trade group of third-party suppliers.

Natural Gas

The suppliers have been able to enter the New Jersey market largely because of the steep decline in natural gas prices, which has given them the opportunity to undercut the cost of electricity offered by the state's four electric utilities. To avert huge price spikes, the state utilities buy their power in chunks over three years, which can moderate increases when prices rise, but leaves customers paying more when the price drops as it has recently.

This has allowed DirectEnergy, which entered the residential market in February, to offer residential customers up to a 10 percent discount on what they are paying to Public Service Electric & Gas (PSE&G), according to Marc Hanks, senior manager of government affairs for North America’s largest competitive supplier of energy.

Their biggest challenge, Hanks said, is to get customers to realize they can shop around and find cheaper sources of electricity.

To that end, the association is putting pressure on the BPU on two key issues. They want to revamp the state’s policies that deal with customers who fall behind in their bills and owe the third-party suppliers money. They also want to change the so-called price-to-compare, a mechanism set up by the state to help customers shop for new suppliers.

The board has initiated a proceeding into overhauling those rules with the trade group seeking a standardization of the price to compare, which differs from utility to utility. "It could help customers shop and compare prices," Bevan said.

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