Homeowners wooed with lower electric rates

Kelcy Dolan
Posted 7/30/15

Earlier this year National Grid customers were confused and enraged after receiving what was perceived as a penalty for choosing another electric supplier.

That has changed, and now at least one …

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Homeowners wooed with lower electric rates

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Earlier this year National Grid customers were confused and enraged after receiving what was perceived as a penalty for choosing another electric supplier.

That has changed, and now at least one company is actively wooing homeowners to leave the National Grid standard offer and save on their electric bill.

In January National Grid’s standard offer increased from 8 to 10.72 cents a kilowatt-hour (kWh). Naturally, customers looked to save and were interested in an offer from North American Power. Looking to attract customers, the company sent out nearly 500,000 letters to Rhode Island customers offering a yearlong deal at 8.99 cents kWh.

As customers switched providers, however, they received a “billing adjustment” that in some cases totaled more than $100. In some cases what customers saved on their electric bills was lost on the adjustment charge.

Because the standard offer is based on an average rate over a sixth-month period, National Grid was paying more for electricity than it charged in the winter months when rates are highest. The company makes up the lost funds during the summer months when variable rates are cheaper than the standard offer.

Essentially, the billing adjustment required customers dropping the standard rate to pay the difference for the actual cost of power up until the time consumers left for another supplier.

National Grid had planned to phase out the adjustment by 2016, but Lieutenant Governor Dan McKee and Attorney General Peter Kilmartin fought to see it done away with immediately. The billing adjustment was eliminated July 1.

Tom Kogut, Public Utilities Commission spokesperson, said the adjustment was just “one more thing” to confuse customers, one more thing they had to take into account when choosing an electric provider.

“Getting rid of the adjustment eliminates one barrier to competition,” he said

Now, with the elimination of the adjustment, the financial losses of National Grid will be tracked and spread out through the businesses’ distribution costs.

Rhode Island’s energy market is more “attractive” to outside suppliers now, who may have avoided moving into the state because the boundary facing possible customers from switching.

Chad Klein, director of communications for North American Power, said, “When a company is looking at states to move into, they don’t just look at the positive aspects, they also look at what will make business difficult.”

North American Power, which ceased proactively marketing to the state earlier this year, is now courting customers. Klein said that of the 56 companies in 12 states North American Power works with, National Grid was the only company with this sort of charge.

“It wasn’t just a disincentive for customers,” Klein said. “It discouraged suppliers in the same way.”

For nearly four months North American Power refrained from reaching out to Rhode Island customers. With the elimination of the National Grid billing adjustment, they plan on sending out more than 250,000 new letters throughout the state over the next several weeks.

Klein believes that North American Power won’t be the only company to be moving back into the state. He expects other out-of-state companies to make their way into Rhode Island’s energy market.

Rhode Island’s market was deregulated back in 1996, but the majority of customers use National Grid as their supplier. The company has 435,000 electric customers and, according to Danielle Williamson, National Grid’s senior media specialist, as of June, 9 percent of Rhode Island customers were using a competitive supplier.

Because the company only tracks consumers on a quarterly basis, it is too soon to tell just how many have left National Grid as a result of the billing adjustment elimination.

Williamson assured in an email that the company does encourage customers to “do their homework” when choosing a supplier to ensure they know just what they are getting when signing with another supplier.

Similarly, she said that customers leaving the standard offer “does not affect the cost that National Grid pays under its wholesale supply contracts. We only buy the electricity that we deliver to our customers at a fixed price, per the contracts.”

Kogut noted that Rhode Island does have a “fluid” and free market, but Klein warned that the whole ordeal damaged the public’s “confidence in consumer choice.”

Although only a few weeks into their new marketing campaign, Klein said the response has been positive. He couldn’t give any definite statistics, but he said the company was in the process of reaching back out to interested parties.

Customers choosing another electric provider will continue to get one bill from National Grid, except a different provider will be listed.

North American Power’s 8.99 cents kWh special offer is only available until Aug. 15 and is similarly only good until the end of the year.

Customers will receive a reminder before the first of next year with new fixed rate options with the company, but Klein couldn’t offer any specifics.

He said, “There is no doubt the energy landscape is changing, and it’s on us to be innovative as a company.”

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