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January 04. 2014 7:36PM

When cheaper energy isn't

CONCORD - The Public Utilities Commission has approved a 9.23 cents per kwh energy supply rate for Public Service of New Hampshire, effective Jan. 1. The new rate is 0.61 of a cent higher than what PSNH charged in the second half of 2013 and likely to drive more consumers to unregulated competitors.

But as the first full year of aggressive competition for energy supply comes to an end, consumers are learning that they'd better read the fine print when signing up with alternatives to the state's regulated utilities.

Thousands of Granite State electricity customers enjoyed comparatively low prices throughout the year, but now that contracts are expiring and the cold weather has hit, some are finding that their new rates with competitive suppliers are higher than the default rates approved for PSNH, Unitil or Liberty Utilities.

Tom Shaughnessy of Manchester was shocked to open his bill last week and find that his rate with North American Power had changed from 7.29 cents to 11.49 cents per kwh.

Judging from emails and phone calls to the Union Leader, he was not alone. The biggest sticker shock came for those on monthly variable rates, some of which doubled in December as a combination of unseasonably cold weather and high prices for natural gas delivered to New England temporarily drove the wholesale price of electricity through the roof.

The average price for one megawatt hour of electricity in New England's wholesale market hovered around $40 for much of the year, but in mid-December, the price on the spot market briefly hit $1,000 at peak demand as power plants fueled by natural gas had to pay exorbitant prices for fuel, if they could get any.

The wholesale price on the spot market ranged from $175 to $200 per megawatt hour during the day on Dec. 31.

Customers with regulated utilities or on fixed contracts with unregulated competitors are largely insulated from the wild swings in the spot market. The monthly rate they pay should be high enough to generate reserves that suppliers use to get through the coldest months, when natural gas is used for heating and less is available for power plants.

Risky variable rates

Some customers, however, were attracted by low variable rates, sold to them in the warm weather months when there's plenty of pipeline capacity for natural gas and wholesale electricity prices drop. Those rates change every month, based on the average wholesale price.

Other customers have been switched over to a variable rate when their fixed-rate contract expires.

"I had a six-month guarantee at 7.29 cents," said Shaughnessy. "When that expired, I went onto a variable rate. I probably should have known that was going to happen, but I don't look at my electric bill every month and scrutinize what I'm paying."

And that's part of the problem. Regulators, consumer advocates, utility representatives and competitive suppliers all agree: If consumers want to enter the unregulated market, they have to pay more attention to the electric supply portion of their bill and understand the terms of service.

Some who contacted the Union Leader about spikes in their bill did not know whether they were on a fixed or variable rate, nor were they aware of notifications that the energy supply companies say they sent out regarding expiration dates and alternatives.

Shaughnessy was actually billed at the higher rate in November, but didn't notice the change until December. He contacted North American and was offered what North American calls its Guaranteed Savings Product, at 7.49 cents for the first month, after which the rate will be variable but is guaranteed to be below the PSNH rate through June 30.

His new rate won't take effect until the next billing cycle, which means Shaughnessy could pay a bill in January with an energy charge of 13.99 cents, North American's forecasted variable rate for the month.

"I don't want anyone else to get stuck like I did," Shaughnessy said. "I'm now stuck for at least another month, and for me it's going to be a very expensive month."

No notice required

Unregulated energy supply companies are not required by the PUC to notify customers on fixed-rate contracts that their expiration date is coming up and they will be switched over to a non-contract or variable rate, although the two largest competitive suppliers in the state - North American and ENH - say they provide such notices.

"We do not currently have such a requirement in our rules," said Amanda Noonan, director of the Consumer Affairs Division at the PUC. "I am aware that two of the main suppliers for residential customers, North American and ENH, do provide notice to their customers in advance of their term ending."

Noonan, who purchases her energy supply from a competitive supplier, said she has received such notices. Shaughnessy does not recall having received one.

North American provided the Union Leader with samples of the emails and letters it sends to customers whose contracts are about to expire. The notice explains how fluctuations in the wholesale price of natural gas are affecting electricity prices and offers customers the opportunity to lock in a fixed rate, but is not personalized with the customer's expiration date.

"Not all suppliers are putting customers on a variable rate when their contract expires," said Noonan. "It depends on the supplier." She said customers with unregulated suppliers need to ask the right questions, circle the contract expiration date on their calendar, and contact the supplier a month or two before that date to find out about alternatives.

Will Fessenden, director Media Strategy for ENH Power, said the Maine-based company purchases energy in advance for the full term of each customer's contract when that customer signs up.

"As part of our business practice, we don't offer any variable rates. All our rates are fixed for all our customers," he said.

Tiffany Eddy, a spokesman for North American Power, said that company offers both fixed and variable rates, and tries to keep consumers informed of their options.

North American and ENH have the largest number of customers in the PSNH service territory and have been marketing aggressively since 2012.

PSNH spokesman Martin Murray urged consumers to compare third-party offers for energy supply carefully with the default rate offered by the regulated utility. "I'm a Unitil customer," he said, "and I've received many letters offering to sell me power at a rate higher than my Unitil rate."

People's Power and Gas was offering very attractive variable rates early in the year, but hit customers with an 18 cents per kwh charge in December. A Londonderry customer said her electric bill went from $99 in November to $337 in December.

Confusion persists

PPG was temporarily suspended from the wholesale energy market on Dec. 24 after defaulting on its financial obligations to the independent grid operator. Its customers were transferred to the regulated utility that serves their community. Most of the 6,000 were assigned to PSNH and can now stay with the regulated utility or make another switch next month.

Resident Power, which serves as a broker for several energy supply companies, had placed customers with PPG, some of whom were guaranteed a low rate for their first two months.

"Some of those customers have called Resident Power and told us that PPG did not charge them the agreed upon introductory rate," said Bart Fromuth, president of Resident Power. "We are working with PPG to have those corrected."

A PPG customer whose bill more than tripled wrote in an email, "I was of the opinion that the PUC would have to approve an increase or at least an increase of that magnitude," illustrating the confusion that persists in the market, since the PUC has no authority to regulate rates for unregulated energy providers.

The deregulated market for electricity in New Hampshire offers opportunities for significant savings as many competitive suppliers continue to offer fixed rates lower than the regulated utilities. Variable rates in the mild weather months can be well below the fixed rates.

Customers continue to flow to competitors.

The most recent "customer migration" report provided by PSNH shows that 96,323 of the utility's 425,829 residential customers now buy energy from an unregulated energy supply company. A year ago, the number of customers who had switched companies was about 50,000.

Now that competitive energy suppliers have been aggressively marketing for more than a year and half, consumers are starting to learn how the unregulated market operates, and sometimes the lessons are painful. As with many services or products, the amount that can be saved often depends on the amount of time someone is willing to invest.

The safest option is to lock in a low rate for a specific time period and pay attention to the expiration date. The cheapest option for many customers is to buy at a variable rate nine months of the year and switch over to the regulated utility rate for December, January and February, which few people have the time or the expertise to do.

"It would take a lot of work on an individual consumer's part to make that happen," said PUC Consumer Advocate Susan Chamberlin.
dsolomon@unionleader.com


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