By Lauren Ennis
Spring has at long last reached Massachusetts, but
that doesn’t mean that consumers aren’t still feeling the bite of winter.
Between damaged roofs and stalled public transportation, 2015 ushered in a
winter that many of our wallets won’t soon forget. As the last remainders of
snow finally melt, one of this winter’s after-effects continues to spark
controversy; the sharp rise in electricity costs. While delivery costs for electricity
remain at a fixed rate overseen by regulators at the Department of Public Utilities
(DPU), supply costs are determined by production costs. The majority of the
Commonwealth’s electricity is now generated using more expensive natural gas,
and as a result, electricity production costs have increased in accordance with
the fluctuating supply and demand of the natural gas market. Since many homes
are heated with natural gas, the demand for natural gas generally rises as
temperatures drop, leading electricity supply prices to likewise rise each
winter and decline in the warmer months. When this year’s forecast reached
unprecedented levels, electricity supply prices followed suit, leading many
customers to change suppliers. If you were one of the thousands of consumers
who made that switch this winter, you might have been surprised to find a bill
from your old supplier in the mail soon after; rest assured that you were not
alone.
What many consumers mistook for a penalty fee from
their old supplier is actually a ‘recalculation fee’ that basic supply
providers charged fixed-priced option customers when they terminated their
contracts mid-way through the payment period. After mixed efforts to bring
competition into the formerly monopoly dominated electricity market in the late
1990’s, Massachusetts enacted the Basic Service Bill Provision in 2000 “to ensure that basic service customers
pay the full costs of providing the service for the period that the customers
receive the service” (Mass.gov). What this rule essentially did, was allow basic
service electricity suppliers to charge customers an additional fee to cover
the cost that they would otherwise lose if a customer ended their service in
the middle of the pricing term. The Commonwealth enacted this provision in
hopes of discouraging customers from changing suppliers each time that prices
rose and “gaming the system” (DPU 14-140). Adding to existing consumer
frustration was the fact that the law did not require companies to inform
customers of the recalculation charge, and customers did not learn of its existence
until they had already switched suppliers. This ambiguity led to confusion and a
high number of consumer complaints when thousands of customers received unexpected
costs after changing suppliers.
Following a six month
investigation, the DPU has now announced the enactment of Order 14-140, an
administrative order which will eliminate suppliers’ right to recalculate
bills. This order is not retroactive, and will not remove recalculated fees
that consumers have already been charged, but it will prevent suppliers from
charging any future recalculated fees to customers who switched suppliers on or
after April 13, 2015. Even with this crucial change, however, understanding
your electricity bill can still be a bewildering task if you aren’t familiar
with the terms that electricity companies use. Next time that you read your electricity
bill, be sure to look out for these key terms provided on Mass.gov:
Competitive Power Supplier: This is the company that creates and sells
your electricity, which is then delivered to your home or business by a
Distribution Company. Competitive Power Suppliers’ rates fluctuate with supply
and demand and vary throughout a given year.
Distribution Company: The company that delivers the electricity to
your home or business. Distribution Companies charge fixed rates for the
delivery of electricity that are subject to the jurisdiction of the DPU, rather
than the marketplace. They also read meters, maintain power lines, and restore
power during outages.
Kilowatt Hour (kWh): The standard of measurement for electricity.
One Kilowatt Hour is equal to 1000 watts of power used over the span of one
hour. An electricity bill is calculated by multiplying the cost of one kWh by
the number of hours of electricity used.
If you find that you
aren’t satisfied with your current supplier, be sure to do some homework before
you decide to change companies. Some key questions to ask before you make a
final decision are:
·
What
companies service your area?
·
Is a fixed
rate or a variable rate best for you?
·
If you
choose a fixed rate, what term length is best for you?
·
Are there
any termination or start-up fees with the prospective company you’re
considering?
·
Are there
any consequences if you later decide to switch from this prospective company to
a new supplier?
*As always, read any
contract before you sign it and do not hesitate to approach the company with
any questions that you might have.
The DPU is currently
creating a website listing supply company rates to assist consumers in making
informed decisions, which will be available in October, 2015. In the meantime, here
are some resources you may want to consider:
The DPU’s page on
Mass.gov for information about suppliers, understanding your bill, and DPU Order
14-140.
http://www.mass.gov/eea/electricity-utilities-clean-tech/electric-power/electric-market-info/choose-supplier.html
Changing regulations
at the Department of Public Utilities, combined with knowledge of your bill and
research about your supplier, can help you avoid receiving any more shocks next
time you open your electricity bill.
Information for this
article was obtained from:
Nancy Stevens,
Director, Consumer Division, Massachusetts Department of Public Utilities Commonwealth of
Massachusetts, Department of Public Utilities, DPU14-140, Order on Eliminating
the Basic Service Bill Recalculation Provision
Mass.gov, The
Official Website of the Commonwealth of Massachusetts
The content of this blog is intended for informational purposes only and does not constitute legal advice. As such, any articles featured on this blog are not meant to serve as or substitute for legal advice. No action should be taken on reliance of the content of this article or any information posted on the Middlesex Community College Law Center Blog. Any specific legal questions should be directed to a licensed attorney.
Lauren Ennis is a paralegal student at Middlesex Community College and is currently working as a consumer mediator at the MCC Law Center and interning at the Youth Advocacy Division juvenile defense office.
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