Electric-price shopping wired with confusion

1/9/2001

For decades, northwest Ohioans have been clamoring for alternatives to Toledo Edison. Be careful what you wish for.

Ohio's electric industry became deregulated a week ago, giving everyone freedom to choose alternate providers of power.

However, many consumers are finding that this new freedom comes with something else: confusion.

Whereas in the past consumers got a bill, grumbled a bit, and paid it, deregulation requires them to know their average cost of electricity or "price to compare," their monthly or annual kilowatt hour usage, and to be able to do a little math.

Consumers who switch providers will have to choose a contract length that could range from a month-to-month deal to a 2-year locked-in rate. They will need to read the terms of their contract to determine whether they can end the deal at any time or face penalties that might devour any savings from switching the first time.

"I'm telling people that patience is a virtue. Don't be rushed into doing something that you're not comfortable with," said Rob Tongren, the Ohio Consumers' Counsel. "Only you can find your own comfort level."

Based on early numbers, consumers in the Toledo Edison service area haven't jumped at electric choice despite their historical dissatisfaction with paying some of the highest rates in the state.

Of 70 megawatts of low-priced power that Toledo Edison's parent firm, FirstEnergy Corp., is selling to independent suppliers as an incentive to serve residential customers in northwest Ohio, only 5 megawatts have been sold thus far, according to FirstEnergy spokesman Ellen Raines.

Based on an average of 750 kilowatt hours used monthly by a homeowner, that would mean only about 3,600 residential customers have signed up with an alternate power provider.

It appears many people are like Toledoan Dean Smith. He is eager to choose an electric supplier but is confused about which one.

"I'm thinking of going with . . . AES Power Direct for two years because I can't believe rates will go down," Mr. Smith said. But he admits it's difficult to choose when there are so many unanswered questions about electric choice.

The basics of electric choice are fairly simple.

By law, a consumer's electric utility must state on a bill a figure known as the "price to compare." That is the rate that the customer is being charged for the utility to generate or make electricity.

The cost of generating electricity accounts for a third of a customer's bill and is the only part of the bill that involves choice. The other two thirds - transmission and distribution - are supplied by the utility, are regulated, and are not subject to choice.

Starting Jan. 1, homeowners and renters in Ohio could choose which company will supply their electricity. Two keys in choosing are the utility's rate, or price to compare, and the supplier's rate. The difference represents savings to the customer.

For example, the average consumer's "price to compare" in northwest Ohio is 4.4 cents per kilowatt hour. If the customer signs up for a contract offering 3.4 cents a kilowatt hour, this customer would save a penny per kilowatt hour or about $7.50 a month. However, the average Toledo Edison consumer is expected to save about $2.80 a month.

Five alternate power suppliers have offered plans, starting last month. The rates range from 3.55 cents per kilowatt hour from AES Power Direct to 3.92 cents for FirstEnergy Services, a subsidiary of FirstEnergy.

Complicating the choice is a new entrant, Houston-based Shell Energy. It has a hybrid rate: customers pay 3.39 cents a kilowatt hour from October through May and 3.76 cents from June through September, when power demands are higher and electricity tends to cost more.

"This seasonal pricing actually is pretty typical in this industry," Julie Short, a Shell spokeswoman, said.

However, Shell's offer ends Feb. 15, while other marketers' offers either have expired or will expire this month. Most are not saying whether they will offer other rates because their initial plans were based on obtaining some of the low-cost power from FirstEnergy.

They expect that remaining 65 megawatts to be gobbled up soon by northwest Ohio municipalities, which can contract for the low-cost power or cut their own deals with independent suppliers.

The confusion over available rate plans and which suppliers are accepting customers prompted Mr. Tongren's office to sign a deal with Wattage Monitor, an Internet firm in Reno, which runs a web site that lists the electric rate plans for a state, calculates savings, and compares prices.

The site is at www.wattagemonitor.com and people can get to it by next month through the Ohio Consumers' Counsel site."There are problems with the calculation process as in how do you tell if you're saving money," Mr. Tongren said. The Public Utilities Commission of Ohio publishes an Apples to Apples rate comparison chart about every two weeks but it becomes dated shortly afterward, he said.

Wattage Monitor lists electric-rate plans and has a calculator function to allow people to determine their savings on a rate, given the expected amount of electricity used. Also, it will permit someone to be linked to a supplier from the site, enhancing sign up, he said.

However, Toledo area residents confused by choice can wait and still save money. By law electric rates are frozen for five years and the cost of generating electricity was automatically decreased by 3 percent for every customer as of Jan. 1.

Further, Toledo, Maumee, Oregon, Perrysburg, Sylvania, Northwood, Holland, Waterville, and the unincorporated areas of Lucas County voted in November to form a buying group, known as an aggregation coalition, to negotiate for lower power on behalf of their citizens.

Leslie Kovacik, a Toledo city attorney heading the local group, said the coalition sent notices to about 20 registered power suppliers asking for their best bids to supply the group - which has about 220,000 customers.

The bids are due back Monday, and in about a month residents will be notified to determine whether to go with the price or to decline to be a part of the group and sign up on their own.

"Our 'price to compare' for most of the area is 4.4 cents," Ms. Kovacik said. "Our best guess is we're going to be somewhat competitive with that, but probably not as good as 3.55 cents that Power Direct is offering.

"I know people are asking, 'But what if your rate turns out to be better?' They need to check with their marketer to see what penalties apply if they break their contract."