REAL Report Highlights Current, Historic Savings Under Electric Choice In Connecticut As Evidence That Supplier Products Are Not Overpriced Or Harmful
The Retail Energy Advancement League (REAL) filed in Connecticut a report, which included recent customer polling data, which REAL said, “definitively demonstrates that retail electric supplier products in Connecticut are not ‘overpriced’ or ‘harmful’.”
As previously reported, PURA is conducting an investigation of supplier rates pursuant to Conn. Gen Stat. § 16-245(a) which states that PURA has the authority to condition an electric supplier’s license and access to the systems and billing of the electric distribution companies on terms the authority determines to be just and reasonable, including, but not limited to, proof that the electric supplier’s products are not overpriced or harmful to residential customers.
The REAL report examines current and historic savings available through electric choice; customers’ desire for choice, including value-added services; and the value from various supplier products offered bundled with electricity. For residential customers, REAL’s report noted that, “every supplier offer currently posted on www.energizect.com is priced below the recently-effective Standard Service rates.”
“This has been the case since at least when the utilities announced their Standard Service increases in mid- November 2022,” REAL’s report said.
The maximum available savings from a supplier residential offer on the rate board, versus Standard Service, is 9.28 cents/kWh at CL&P and 7.05 cents/kWh at UI. For the Jan. to Jun. 2023 Standard Service period, a residential customer (750 kWh/Month) choosing the lowest supplier rate would save $418.50 at CL&P and $317.25 at UI, REAL’s report said.
REAL’s report noted that, “in accordance with state law, residential customers may leave their supplier with no early termination fees, so customers on supplier products with terms greater than the Standard Service period (ending in June 2023) can continue to enjoy savings, if that is the case once the July to December Standard Service rates are approved, or can switch back to the utility at any time within 72 hours or to another supplier if they determine that is the better option for them.”
Citing OCC data, REAL’s report noted that residential customers served by competitive suppliers saved $11,281,399 between January and October 2022 compared to utility Standard Service rates.
“In OCC’s most recent fact sheet published in December 2022 with data through October 2022, OCC reported that in October 2022, 7 out of 10 residential customers on supplier products paid less than the Eversource Standard Service rate and 6 out of 10 residential customers on supplier products paid less than the United Illuminating Standard Service rate,” REAL’s report said.
“The savings reported above by OCC shows information only through October 2022, which is their most recent data published. We reviewed the most recent data filed by the utilities, which shows supplier billed rates in November 2022. Weighting the average aggregate supplier billed price (i.e., weighting the price by the number of customers on that price), we found that customers who enrolled before November 2022 were on products priced on average at more than 50% less than the recently effective Standard Service rates,” REAL’s report said (with the weighted average aggregate supplier rates being just under 11 cents per kWh for this period).
REAL’s report noted that, due to lower supplier rates available in November, customers who shopped upon the announcement of the default service price increases would be saving even more than the savings noted above for a customer shopping today. Specifically, using the weighted average aggregate supplier rate of just under 11 cents per kWh, savings for the Jan. to Jun. 2023 would be $500-$600 (for usage of 750 kWh per month), depending on the customer’s EDC.
REAL’s report also examined historical pricing data, developing a Sharfman Savings/Loss Matrix based on supplier billed rates from 2017 to 2021.
REAL’s report said that its analysis of supplier billed rates from 2017 to 2021 illustrates that supplier products, particularly those with fixed price terms of 12 months or longer, provide savings opportunities for residential customers. Among other things, REAL’s report observed that, for residential customers in Eversource’s service territory, there is an average aggregate savings of 3.81% for those enrolling in a 12- to 36-month contract between August and November 2017 to 2021.
For residential customer enrollments between August and November from 2017 to 2021 in United Illuminating’s service territory, there is an aggregate average savings of 5.17% for residential customers, REAL’s report said.
“A general trend observed in both utility service territories was that supplier products featuring a 36-month fixed price term, the longest fixed price term studied as part of the Matrix, yielded savings on a weighted average basis regardless of start month or year. The implication being that customers opting for such products realized savings over the utility Standard Service rate on average over the term of the product in addition to enjoying price certainty for a full three years, as well as any other attributes the product may have offered, such as renewable content or other amenities,” REAL’s report said.
REAL’s report observed that, “The majority of current supplier billed prices and, as of January 13, 2023, all new enrollment offers are below the January to June 2023 Standard Service rates. However, there have been times when individual supplier prices were above the utility Standard Service rate. This is a normal occurrence in a competitive market, as in fact, it is a competitive market subject to prevailing market conditions such as weather, supply/demand imbalances, macroeconomic developments, etc. This type of price divergence should not be interpreted as an ‘overpriced’ product or customer ‘harm’, as some opponents to retail electric choice have suggested.”
“In addition, as this point is often overlooked, we thought it would be useful to provide an illustration of the timing of when the price offer is extended to the customer to demonstrate why a point-in-time comparison is of limited value. Imagine an Eversource customer had enrolled in November 2022 on the then-available 13.79 cent/kWh supplier product for 36 months when Eversource’s Standard Service rate was 12.05 cents/kWh until December and then 24.17 cents/kWh starting in January through June 2023. A comparison of the supplier price to Standard Service rate for the customer’s first month of enrollment in December would show the customer is paying 1.74 cents/kWh more. But after that first month, the customer then is paying 10.38 cents/kWh less for the next 6 months. This is a very plausible situation that was available to Eversource customers in November of this year. Once the next set of Standard Service rates (for July to December 2023) are known, the customer can evaluate whether remaining on the 36-month product is still beneficial, and if not can return to the utility within 72 hours without penalty,” REAL’s report said.
REAL’s report also shared results from an Emerson College poll it commissioned in September 2022, prior to the announcements of the standard service rate increases.
REAL’s report said that, “95% of Connecticut customers value a market with choice in products and services offered as opposed to one where the government restricts those same options. And nearly 90% of Connecticut customers want the option to choose a supplier, even if they don’t always shop for one.”
REAL’s report said that the poll shows that, “80% of Connecticut customers responded that products or services bundled with their supply service, such as renewable or clean energy products, are important to them. These same customers reported that they are willing to pay more to enroll in these products, regardless of income level.”
“Statewide, 58% of customers were willing to pay some additional amount to enroll in a clean energy product, with similar trends across all incomes. energy,” REAL’s report said.
REAL’s report said that supplier green energy products accounted for over 2.2 billion kWhs of green energy content over the five-year period from 2017 to 2022. Using the EPA’s typical residential home equivalency value of 10,715 kWhs of usage per year, this would equate to enough green energy content to offset the energy usage of over 200,000 homes, REAL’s report said.
The retail value of this green energy content is over $33 million, REAL’s report said.
REAL’s report further said that the Emerson College poll shows the value that customers place on selecting a supplier product that offers perks beyond just the energy commodity, and that customers are willing to pay a premium for it.
REAL’s report said that 68% of polled customers view bundled products as important, with 55% of those customers willing to pay some additional amount to enroll in that product, once again with similar trends across all incomes.
Based on data responses in the proceeding concerning the stated value of certain value-added offerings, REAL noted that, for a residential customer using 750 kWh per month, bundled offerings reflect the following average added value to the customer:
Cash Back / Rebate 0.62 cents/kWh Charitable Donation 0.60 cents/kWh Energy Efficiency Product 1.26 cents/kWh Gift Card 0.77 cents/kWh Home Security & Automation 2.77 cents/kWh Home Warranty / Service Plan 0.27 cents/kWh Loyalty Reward Program 1.38 cents/kWh Other Product 0.79 cents/kWh Rebate 1.11 cents/kWh Streaming Subscription 0.67 cents/kWh
REAL warned that these benefits from electric choice could be lost.
REAL’s report noted that the percentage of residential electricity load served by suppliers has diminished from a peak of around 50% in 2013 to recent lows of 12.6% for Eversource and 13.08% for United Illuminating.
“This deterioration in the competitive market is also evident in the number of active residential suppliers seeking to enroll new customers. As of December 2022, based on a review of offers listed on EnergizeCT.com, there are only six suppliers with offers compared to 24 suppliers in 2018. Between the two utilities, the 24 suppliers offered 164 products on EnergizeCT.com on January 1, 2018 compared to the 26 products on EnergizeCT.com on October 1, 2022. This represents an 85% decrease in available offers,” REAL’s report said.
“This deterioration is troubling because it means that there are fewer choices available to customers. Electric suppliers are valuable conduits for delivering innovative products and services to customers. Suppliers can help customers access lower, prevailing market prices through a range of supplier products. This benefit may not fully accrue if the residential market continues to deteriorate and suppliers are unwilling to deploy capital and scarce resources to attract and retain customers in Connecticut,” REAL’s report said.
REAL’s report also noted that supplier complaints have decreased from 607 (0.15% complaint rate based on number of supplier accounts) in 2017 to 146 in 2021 (0.07% complaint rate).
“The complaint information … is not indicative of widespread customer dissatisfaction with products provided by competitive electric suppliers. Recent regulatory reforms, enforcement actions, and modified supplier business practices have largely been effective and have improved the customer shopping experience,” REAL’s report said.
REAL noted that the average supplier complaint rate of 0.10% from 2017-2021 is the same rate as the complaint rate for the utilities over that same period.