Variable-rate electricity plans pose high risk of sticker shock

CONSUMER FORUM

Posted Sept. 28, 2014, at 9:18 a.m.

Thousands of Mainers signed up last spring with suppliers of electricity, who offered what seemed to be great deals. Now, many of those consumers are having second thoughts as the second phase of the arrangement kicks in.

One deal was a six-month contract to buy power at a fixed rate, roughly one-half cent below the standard offer price. Eric Bryant, senior counsel for the Maine Public Advocate, says such a contract offered real savings for many consumers.

But in a news release last March, Bryant warned consumers to watch their calendars. Once the six-month contract was up, Bryant cautioned that a variable rate — likely fluctuating month to month — would kick in.

The variable rates are driven by wholesale market prices. Last winter, MPA says some variable rates went as high as 25-cents a kilowatt hour, or nearly four times the standard offer price.

“Their rates went very, very high,” Bryant says of some consumers who suddenly found themselves with a variable rate contract.

Bryant said last spring MPA generally discourages variable pricing agreements because of sticker shock. Last week, MPA called on consumers to ditch their variable rate deals and get back on the standard offer price, which can’t be raised until March 1 of each year.

“North American Power is supposed to let customers know their contract is expiring, but we know some customers haven’t gotten notice, and we’re concerned that those who have received notice may not understand the potential costs of switching to a variable rate,” said Public Advocate Tim Schneider in last week’s statement. “Missing that single piece of mail could cost a customer hundreds of dollars this winter.”

MPA advises customers of North American Power to call the company at 888-313-9086 or email at customercare@NAPower.com to find out when the contract expires. If the variable rate agreement is still in effect, ask the company to switch immediately to the standard offer; MPA says there’s no need to wait for a meter reading and that the company must process a request within two business days of receiving it.

Emera and Central Maine Power charge a $5 “off-cycle drop fee” if you switch before your next meter reading; there’s no fee if the switch happens “on-cycle.”

If your fixed-rate plan has not yet expired, you can ask North American to switch you to the standard offer on the date the plan does expire. You may also make the change by calling your utility (Emera Maine or Central Maine Power) directly.

North American Power says in a statement its policy is to send notices to all fixed-rate plan customers, telling them when their plan expires. The notices say, if the customer does nothing, a month-to-month variable rate will begin; it also sets a date by which customers should contact North American to choose another fixed rate plan.

North American Power representative Tiffany Eddy told me, “Our goal is to keep our customers happy and to keep communications going.” She could not explain why a number of customers had contacted the advocate saying they had not been notified.

Eddy also disputed figures cited in the advocate’s release, saying “our rates have never been as high as 25 cents (per kwh).”

The public advocate mentioned only North American in its release, but consumers should be aware that other suppliers make similar offers. Know what a plan entails before signing up, so that you don’t face unpleasant surprises later.

 

Click meter to access six things to consider when choosing a supplier

The Office of the Public Advocate’s website is updated monthly. It lists the prices offered by major electricity suppliers and suggestions for choosing a supplier. Visit the site at http://www.state.me.us/meopa/utilities/electric/supply.html or call 207-287-2445 to speak with someone from the Advocate’s office.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email contacexdir@live.com.

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