Value of ESCO Service Questioned

A news story today suggests that energy cost savings may be available from ESCOs. See Con Edison Solutions offering O&R customers lower rates, Middletown Record, Sept. 22, 2009. A closer look past the headlines , however, indicates that a price lower than current charges for the same service from the traditional utility is promised only temporarily, "for the rest of September."

This promise of a temporary savings is possibly a "teaser" rate to induce customers to sign up for a long duration contract that typically locks in the customer with early termination fees, but allows the ESCO to raise its prices. See Think Twice Before Switching Utilities, PULP Network, September 28, 2006.

Due to state sales tax breaks, it is theoretically possible for ESCOs like Con Edison Solutions -- a corporate holding company affiliate of Orange & Rockland and Con Edison -- essentially to resell the same service at a profit, without adding value. See

• ESCO Tax Subsidies: A Hidden $128 Million Cost of the New York PSC's "Retail Access" Scheme, PULP Network, Jan. 12, 2009;
  
• ESCO Advertises 9.75% Tax Savings on Delivery Service, PULP Network, June 18, 2009.

In a closer look at ESCO utility service last week, a Syracuse, NY television station found customers who are not benefiting over time from having switched to gas or electric "commodity" service from ESCOs:

There are plenty of energy service companies, or ESCOs, out there, knocking on doors promising big savings if you switch over from National Grid.

But here's The Real Deal on what you should know before you sign on the dotted line.

We get a ton of calls and emails about door-to-door energy salesmen. They get paid to put the pressure on, to get you to switch from National Grid or NYSEG. They are the suppliers; the utility still delivers the gas and electric.

If an ESCO shows up at your front door, first make sure they have proper identification. They should all be wearing a photo ID with the name of their company on it.

Then, ask for written information about the company, their rates and their cancellation policy; tell them you'll think about, do a little homework and then contact them by phone if you're interested in switching.

If you do decide on the spot to switch, New York State law gives you three days to cancel the contract without penalty if you change your mind.

Be sure to read all the fine print; some of these companies lock you into a set rate for a certain number of years.

More often than not, the switch to an ESCO doesn't pay off.

This time last year, an energy salesman came a knocking at Matt Bishop's front door.

"I opened up the door, listened to what he said and it sounded like a good deal at the time, so I ended up signing up for a two-year commitment at their lock-in rate," Bishop says.

At the time, the lock-in for natural gas was $1.15 per therm, but that deal quickly soured as the market dropped.

The most National Grid has charged since Bishop locked in is 92 cents a therm. Right now, prices have plummeted to less than 40 cents, which means Bishop's now paying three times more than National Grid customers.

See Signing with an ESCO: The Real Deal, WSYR-TV, September 16, 2009. A video clip is here.

Customers of Con Edison, Orange & Rockland, and Central Hudson can now compare what they are paying for electric service from alternative ESCO providers with what they would pay as a full service customer of the electric utility, using PULP's electricity bill estimator.

For further information see

• PSC Makes ESCO Service Comparisons Difficult,
  
• PULP's Con Edison Bill Estimator, and
• PULP's website page on ESCO contracts.

Update
January 7, 2010 - PULP has not been able to revise its electricity bill estimator since March, 2010, due to the loss of state funding.

Utilities in a number of other jurisdictions, and regulatory bodies in other jurisdictions, have online bill calculators that make it possible for consumers to determine what a given amount of energy usage would cost if service were received from the utility.

Georgia Power

Tamil Nadu, India

Ontario Electricity Board

Duke Power (12 month ESCO price comparison)

Southern Maryland Electric Cooperative

NSTAR ("This three part tool can show you how your NSTAR bill will differ if you choose to sign an agreement with a Competitive Power Supplier").

Sri Lanka

District of Columbia Public Service Commission (Calculators for comparing ESCO service with direct service from PEPCO, and for estimating bill impact under a PEPCO's pending rate increase request)

Colorado Springs (calculator for estimating bill impact of pending rate increase request)

Nebraska Public Power

Calculators such as those above can be useful tools for consumers in a number of situations, for example:

• in evaluating the bill impact when considering whether to purchase energy saving appliances,
  
• in comparing the cost of ESCO service with full service from the traditional utility,
  
• in estimating the cost of utility service for prospective buyers or renters,
• in apportioning partial month utility costs between roommates or at real estate closings,
  
• in estimating the impact of a proposed utility rate increase, or
  
• in checking to see if a landlord is charging more for submetered electric service sold to tenants than the traditional utility would charge a customer for direct utility service.