Retail power marketers fight reform legislation in Springfield

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Springfield has a chance at last to reform a retail energy supply industry whose marketing tactics have led hundreds of thousands of households to pay more for electricity than they would if they just stuck with Commonwealth Edison.

The industry is making a last-ditch bid to water down the bill, which easily passed the state Senate, in the House. Negotiations with Illinois Attorney General Kwame Raoul, who is championing the bill, are at a delicate state with two weeks to go before the legislative session ends.

In the meantime, the situation is leading to more consumer unhappiness. Customer complaints to the Illinois Commerce Commission, which regulates utilities and oversees power marketers, spiked 70 percent in 2018 compared with the year before.

Despite two straight years in which customers of these retail suppliers collectively overpaid by more than $100 million, the number of consumers buying from a supplier other than ComEd has remained high. As of the end of March, 1.17 million households got their electricity from a retailer, about 1 in 3, according to the ICC. That was just slightly above 1.16 million a year before.

The Senate on May 1 overwhelmingly passed legislation that would require suppliers to plainly state the utility’s comparable price when making offers and in the bills that their customers receive once they sign up. It also

would bar suppliers from enrolling households getting federal assistance in paying their utility bills. The industry has agreed to those things, but the sticking point now is suppliers’ ability in current law to automatically renew contracts of customers after they expire.

That has led to substantial price increases after those contracts renew and customer anger when they realize they’re paying far more than ComEd customers are.

The Senate bill would require customers to assent to those contract renewals or be returned to the utility. The industry wants to be allowed to continue to automatically renew when customers don’t respond to communications in the mail or otherwise about how their electric bills will change.

Raoul says he’s insisting on eliminating automatic renewals. "There’s a fundamental difference between electricity and, say, cable TV," he says in an interview. "I can live without HBO, but electricity is different."

Industry representatives say maintaining their ability to automatically renew their customers is a matter of preserving any kind of competitive market for residential customers. Without it, "I think it will shut everything down," says Teresa Ringenbach, senior manager of government affairs in the Midwest for Houston-based Direct Energy, one of the most active marketers of power and gas in the area.

ALTERNATIVE LEGISLATION

The industry is supporting alternative legislation that would beef up requirements to provide customers notice when their contracts expire and how their prices will change. More significantly, it would allow only suppliers providing customers with a fixed price over 12 months to automatically renew. That’s aimed at eliminating the "teaser" rates that provide savings for three months and then soar after that period and fluctuate on a month-to-month basis.

When customers agree to a fixed-rate, 12-month contract with a supplier, "we believe that’s a long-term relationship with a customer," Ringenbach says. Requiring an affirmative green light from the customer to renew is equivalent to acquiring the customer a second time, she says. The suppliers’ legislation would require that any auto-renewed customer be allowed to return to the utility without penalty.

Ringenbach allows, though, that there would be no restrictions on how much suppliers could raise the price after the 12 months were up. That would seem to open the door to "bad actors" simply altering their methods slightly to jack up prices for customers without their noticing until after they’ve overpaid for months. Few take the time to review their electric bills closely.

What happens from here isn’t clear. Raoul says House leaders have asked him to try to strike a deal with the industry. That may not be possible. "We’re not going to sit at the table to compromise away what makes this worth doing in the first place," he says.

There have been other discussions about pairing the legislation with another pending energy-related issue—ComEd’s controversial push to extend its ability to hike delivery rates yearly via a formula for 10 years past its expiration in 2022. Raoul dismisses that, too. "This conversation should happen in isolation," he says.

‘WE APPRECIATE THE CONCERNS’

The Illinois Commerce Commission, now under new leadership with Gov. J.B. Pritzker’s recent appointment of Carrie Zalewski as chair, isn’t taking a formal position. A spokeswoman says, though, "We appreciate the concerns the bill addresses."

Efforts by the commission to strengthen marketing rules for the industry haven’t had much effect to date, judging by the 2,388 consumer complaints lodged with the ICC last year. In 2017, there were 1,401 complaints.

ComEd says it wrote off $49 million in uncollectible accounts in 2018, up from $46 million the year before. In both years, suppliers’ customers were responsible for $10 million of that.

ComEd, however, receives revenues from the delivery portion of the bill for suppliers’ customers, as well as its own. Delivery was $20 million of the total. So, when comparing apples to apples, ComEd customers accounted for $19 million of the energy-cost write-offs compared with suppliers’ $10 million. With suppliers serving about one-third of the residential market, their portion of customers who couldn’t pay their bills is about in line with their market share.

06-RK Email 11,16-Econ,17-Energy,19-Legal,22-Talk,26-Delivered,AllPolGA

via Crain’s Chicago Business http://bit.ly/1mywUHL

May 17, 2019 at 03:35PM

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