AG: Competitive electric suppliers missed 'perfect' savings opportunity

As electricity service rates from utilities soared in some cases to more than double the previous highs between July 2022 and June 2023, the competitive electric supply industry failed to deliver on its claims to provide significant savings for Massachusetts households, the attorney general's office said.

Attorney General Andrea Campbell's office found the industry that's in Beacon Hill's crosshairs again this session generated "only $30.4 million in net savings" for its customers in a year of unprecedented volatility in energy markets. The AG's office said that the relatively paltry savings for that year were "dwarfed by the significant net losses experienced in every other year studied" and further bolster Campbell's desire to outlaw the industry.

Zooming out to look at the last two years of data — the period from July 2021 through June 2023 — Campbell's office found that people who signed up to get their electricity from a competitive supplier lost a net $51.8 million compared to what they would have paid on basic utility service. Over the last eight years, customers of competitive suppliers have paid $577 million more than they would have had they stayed on basic service, Campbell's office said.

"This report once again shows a clear pattern by the individual competitive electric supply industry of substantially harming our residents, with customers experiencing net losses of $51.8 million for the two years studied and predominantly in communities of color and low income communities," Campbell said. "The harms caused by these companies significantly outweigh any benefits to consumers, and I will continue to push and advocate to the Legislature for the elimination of this predatory and broken industry."

On average and compared to what they would have paid on basic service, each competitive supply customer lost $134 from 2015 to 2016, lost $226 from 2016 to 2017, lost $155 from 2017 to 2018, lost $187 from 2018 to 2019, lost $190 from 2019 to 2020, lost $231 from 2020 to 2021, lost $202 from 2021 to 2022, and saved $80 from 2022 to 2023, the AG's office said.

The one year that generated a net savings for competitive supply customers, the report said, came during "an unprecedented spike in basic service electric supply rates." The high rate of $0.33 per kWh in 2022 to 2023 was more than double the previous record high rate of $0.16 per kWh, set in 2014–2015.

"Record-high basic service rates should have presented the perfect opportunity for the individual residential electric supply market to deliver on its promises and provide customers with the benefit of significant savings. Analysis of the actual rates charged by suppliers to their customers during this timeframe, however, reveals a broken and predatory market that continues to harm customers, and low-income customers in particular," the report says.

Massachusetts has allowed residents to get their electricity directly from a competitive supplier rather than a utility company since 1998, a feature of the prior year's utility industry deregulation law. The number of homes that got their power through a competitive supply contract has been on the decline and stood at 377,914 homes as of June 2023, according to the AG's report. There were 53 different suppliers active in the Massachusetts market last year, the report said.

There has been a concerted effort among some top Beacon Hill policymakers to put an end to the competitive electric supply industry's residential sector, warning that it often uses predatory tactics against consumers. Gov. Maura Healey pushed unsuccessfully for that as attorney general, and Campbell has picked up the effort. Industry leaders have pushed back, arguing that banning them from signing up residential customers would stifle consumer choice.

Christopher Ercoli, president and CEO of the Retail Energy Advancement League that backs industry reforms rather than outright elimination, said the report from Campbell's office "misleads both the public and the state legislature" with the way it compares basic utility products to "value-added products" offered by some competitive suppliers.

"Despite this, the data still shows that the competitive market shields consumers from rate shock, a crucial point the author fails to emphasize. Massachusetts customers have spoken loud and clear. They prefer the freedom to shop for power, rather than being subjected to price uncertainty and limited renewable options from the incumbent utilities," he said.

Campbell's office and others who support the elimination of the competitive supply market have similarly complained about the methodology of industry studies and reports.

Legislation that would ban competitive electric supply for residential customers has been on Beacon Hill's back burner in recent years. The Senate adopted language cracking down on the industry in its version of a 2022 climate and clean energy bill, but the idea didn't survive negotiations with the House.

Telecommunications, Utilities and Energy Chairmen Rep. Jeff Roy and Sen. Michael Barret have said they want to tackle another omnibus climate and clean energy bill this year, and Roy last year said new regulations for competitive retail electric supply would likely figure into it.

This session's primary ban bill, filed by Sen. Brendan Crighton, already got a favorable report this session from the Joint Committee on Telecommunications, Utilities and Energy. Meanwhile, REAL backs a bill from Rep. Tackey Chan that would allow the industry to continue with new guardrails. The TUE Committee redrafted that bill.

On the heels of Campbell's report Wednesday, the Green Energy Consumers Alliance released a letter signed by 97 clean energy, environmental justice and consumer protection organizations calling for the Legislature to outlaw the residential competitive supply industry.

"The residential third-party supplier market must come to an end," the groups wrote last week. "We do not believe that efforts to fix an industry that is beyond repair, including H.3155, An Act Modernizing Competitive Energy Supply, will ultimately succeed in protecting our communities from high costs and predatory marketing practices."