Electric rate plans have things called teaser rates, introductory rates, and rate plans long term customers can’t even renew on. These rate plans that look so good often are not even offered to their existing customers. What is going on here?
What the reality is, you see a sparkly looking price that looks fantastic and you order electric service with that company. They have hooked you in now it is very important that you keep track of your renewal date when your rate expires.
The reason you need to keep track of when your rate plan expires is because they will inch that price up on you. It might go up 23 % to start with but the next month it might be 30 %, and the month after that it has headed into the 222 % markup territory.
Rates go up like this with people and how much is markup and how much is a price is not completely certain. Is it that high simply because it is not hedged into a fixed rate or did that just add more profit into the price? The higher rates are a little of both profit and unhedged prices making the rate higher. These high increases though to add in a profit and the consumer loses in these situations.
The balancing act is how much should the consumer be protected against these price increases and how much freedom should be given to let people make their own bad choices.
Low-income families lose especially because if you only make $30,000 a year and you get hit with an electric bill that is over $1,000 in one month you are going to be in a pretty bad bind. You may not be able afford groceries, rent, etc. with a high bill like this.
There are bill pay services like what is available with the Department of Health and Human Services but they take time to setup. When you realize you need this type of help you may be in a stressful time of trying to keep your electric service on from disconnection for non-payment.
In Maryland Someone Has Shown Just How Often People Get Fooled By Introductory Rates
Maryland deregulated their electric and gas markets and multiple retail electric companies came into the market. These retail providers compete against Baltimore Gas and Electric Company. Just as many people percentage wise get fooled by advertised rates in Texas as they do in Maryland. Don’t let those introductory rates trick you. Stay on a fixed rate and stay vigilant.
The data was compiled and shared by a website called Energy Supplier Helpdesk and offers some valuable information on how low-income families have been confused by retail offers and ended up paying more than they bargained for. You can read more about what they have tp say on this website: https://www.energysupplierhelpdesk.org/low-income-prices-off-real-bills
We have put together a chart using some of the data they provided that shows how high in percentage the retail electric rates were compared to if they had just stayed with BGE. BGE was the monopoly electric company prior to deregulation. Now BGE must compete with the retail electric providers. When a market becomes deregulated the government makes the monopoly company price their energy in a way that it does not try to undercut everyone else to facilitate competition instead of discouraging it. There is an interval of a few short years this happens and then BGE has fair game to price as they see fit.
“Your energy service is divided into two parts; supply, the cost of the gas and/or electricity, and delivery, transportation of the energy.
Delivery is a regulated service which means that BGE will continue to deliver gas and/or electricity to all customers. This also means that BGE is responsible for the wires, poles and outage restoration regardless of supplier. Since BGE delivers to all of the central Maryland service area, its costs and policies are regulated by the Maryland Public Service Commission (PSC).
However, supply is not a regulated service. Energy suppliers that are licensed by the Maryland Public Service Commission and registered with BGE can become your supplier. This gives you the choice and allows you to shop for the best energy rates and terms—if you wish.
You can choose to purchase your gas or electricity supply from BGE at a price approved by the Maryland PSC.”https://www.bge.com/MyAccount/MyService/Pages/EnergySupplyOptions.aspx
Green Mountain Energy
A striking find was that many of these retail electric customers did not even realize the market was deregulated and that they had made a choice. These electric service customers simply thought they were on the electric company as if there was still solely one company.
If you have energy consumers signing up for electric service not realizing they have to make sure they are on a fixed contract then many of these customers will roll off contract to a much higher rate and be severely stung by a much higher price.
Donny has been writing about the deregulated energy markets since early 2007. His knowledge has helped consumers lower their electricity cost.