In 1997, to help lower people’s power bills, lawmakers in Massachusetts decided to create a new policy that would allow the state’s residents to buy power from businesses in competition with their local utilities.
Today, about 450,000 people in the state get their electricity from competitive suppliers. But this controversial policy of creating competition for electric companies, known as deregulation, has failed to save money for ratepayers.
In fact, since 1997, customers have paid $426 million more for their electricity, than if they had stuck with their local power company.
This outrageous transfer of wealth is why the attorney general of Massachusetts and representatives from the governor’s office recently testified in the state legislature that now it is time to admit deregulation was a mistake and end the competitive electric supply industry in the Bay State.
As Attorney General Maura Healey told the committee, “I know it is a big deal for us to call for the banning of an industry. I don’t make that call lightly, but I make that call based on the documented data, as well as the anecdotes, but more importantly the data that we have studied that show why this industry is harming our residents.”
Worse, these competitive suppliers are using high-pressure sales tactics to take advantage of the least sophisticated customers. Their marketing typically offers a promise of savings, but locks customers into long-term agreements that mean they pay more for electricity than if they had stayed with their local power company.
Massachusetts Energy and Environmental Affairs Secretary Kathleen Theoharides made this very point in that committee hearing about deregulation: “The evidence shows that it has increased rates, particularly for the state’s most vulnerable residents, and is causing them undeniable harm.”
Because competitive suppliers have been ripping off low-income people for years, the attorney general’s office recently issued a comprehensive report that found “the annual consumer loss for low-income participants is $241, which is 24 percent higher than the annual consumer loss of $194 for non-low-income participants,” assuming both incomes groups use an average of 600 kilowatts per month. In other words, low-income ratepayers are bearing the brunt of these scams.
Last year, the attorney general’s office reached a settlement with one of these competitive suppliers for cheating 100,000 Massachusetts customers. Starion Energy and two of its principals agreed to pay $10 million to the state. The attorney generals’ lawsuit against Starion alleged: “defendants violated the state’s consumer protection laws by engaging in unfair sales tactics, including unsolicited telemarketing calls and pre-recorded robocalls, that deceived Massachusetts customers by falsely promising them lower electricity rates while ultimately charging them, collectively, millions more on their bills.” Yikes.
Supporters of deregulation like to insist the unethical behavior by these suppliers isn’t industrywide. But, Liz Anderson, deputy chief of the attorney general’s Energy and Telecommunications Division, told lawmakers at the hearing: “There are no good apples … There is no supplier who is able to consistently provide their customers with lower-priced electricity rates.”
Finally, I work for an organization that is made up of consumer advocates, electric utilities, former lawmakers, Democrats and Republicans, and organized labor committed to exposing the risks of deregulation.
Supporters of deregulation like to dismiss my organization, called Power for Tomorrow, for taking funds from utilities. But that is a red herring. In reality, competitive energy suppliers are taking advantage of low-income families by saddling them with higher electric bills. The people pushing deregulation are the ones who should be apologizing.
Gary Meltz is the executive director of the advocacy group Power for Tomorrow.