Many deregulated electric service and natural gas utility states have expressed their anger regarding variable energy contracts. Connecticut cuts variable electric rate contracts off so the consumer complaints stop and constituents are happy.
The whole point with energy deregulation is to give people a choice and ability to save money over only having the option of one monopoly energy provider.
The idea of giving people a choice in what to buy is generally well received and accepted by most. The surprise with electricity deregulation is when so many energy consumers file complaints of their electric rates doubling and tripling in price.
There are Always Recent Examples of the Variable Electricity Price Hike
A perfect example of how electric service prices can double can be seen with this recent review. This Hudson Energy business customer saw his electric rate go up dramatically in price once it switched over to a variable rate.
Could he have renewed his energy contract? Yes he could have but many new to the process just aren’t familiar with the risks of changing electric providers and how that can affect the electric rate later on.
How much is electricity per kWh in CT?
The average residential electric rate in Connecticut is 24 ¢/kWh, which is 30% higher than the national average electric rate of 17 ¢/kWh.EIA.gov
What frequently happens is someone listens to a sales pitch by an energy broker and orders a fixed energy contract.
People are not familiar with an open energy market so when the contract expires they don’t expect to be put on a variable contract that goes up in price 100% or more.
Governor Ned Lamont has made some changes in the state so that variable electric contracts don’t shock businesses and residential accounts with exorbitant prices they did not expect.
HB 6526 provides that, “Notwithstanding any provision of title 16, on and after July 1, 2022, no electric supplier shall charge a residential customer a variable rate for electric generation services. On and after July 1, 2022, any contract between an electric supplier and a residential customer that provides for the use of such variable rates shall be deemed null and void.”Substitute House Bill Number 6526 Public ACT NO. 21-117
Variable Energy Contracts are a Paroxysm of Rage for Many Connecticut Customers
Just look online and see the many reviews of unhinged customers that ordered a fixed stable electric rate plan. They were comfortable and satisfied until it came off contract and the rate went up anywhere from 100% – 500% in price.
Seeing an electricity comparison of multiple rate plans and choosing the best one funneled people into what seemed like a winning shopping choice.
The electric plan that is chosen usually works out for awhile until it rolls into a variable contract after coming off the fixed contract.
The fixed electricity agreements are usually anywhere from 12 months to 36 months in length.
In the state of Texas tens of thousands of residential accounts signed up with a company called “Griddy Energy” only now to be mocked as “Greedy Energy”.
Griddy Energy sold a variable plan that closely followed the highly volatile wholesale electricity index.
When winter storm Uri in Texas hit in 2021 these peoples residential rates went up 400% and more. People were getting bills for $2,000.
More States Likely to Ban Variable Electric Rates Siding with Connecticut
Connecticut is not the only state with customers who absolutely hate variable electric rates. Many complaints have been issued with the state Attorney General or the Public Utility Commission in relation to a variable rate that skyrocketed through the roof.
Places like Texas and Maryland have many reports of customers being completely out of the loop that their energy contract was about to jump in price by 200% or more.
The lack of communication by the provider to the energy consumer causes these electric bill anomalies that make electric and natural gas deregulation moot.
Customers see their electric bill go up 500% and wonder why in the world did the state ever deregulate the electric service market. They though monopolies were bad but a 500% increase in an electric bill is a lot worse than the boogie man of “the monopoly”.
Banning Variable Electric Contracts Creates Other Issues
When you ban variable electric rates you create a separate situation where an electric provider can keep you for longer and require that you give a certain amount of notice before leaving the energy company.
If you quit with an energy company in Connecticut that has you in a long term fixed contract it means they hedged your energy.
The hedged electric service agreement was a costly investment by the electric provider and so when you break it they will ask you for an early termination penalty.
When variable electricity prices cause outrage you can bet early termination penalties will also cause a storm of rage by disgruntled energy customers.
Another scenario that will play out is the electric company will keep you as a customer for longer. The customer churn rate will be much less because you will not need to revisit your energy contract for awhile.
Connecticut electric companies will need to forecast how many customers they will keep or lose and how many they will likely add and hedge their energy out into the future based on keeping everyone’s electricity price stable every 12 months.
Fixed energy agreements will require more planning and expertise with the energy companies and will callback to the days of the energy monopolies who had everyone as a customer and could easily forecast their customer count not needing to worry about energy customer churn rates.
Donny has been writing about the deregulated energy markets since early 2007. His knowledge has helped consumers lower their electricity cost.