Op-Ed: The Case Against Utility Deregulation in VA

By Elin Katz

 

Originally published in the Roanoke Times, Tilson's VP of Utilities Elin Katz shares her expertise in an op-ed on utility deregulation in Virginia, where lawmakers have re-introduced a bill that would replace the Virginia Electric Utility Regulation Act with a system under which retail customers could purchase electricity from the retail electric provider of their choice.

As the former Consumer Counsel for the State of Connecticut and former President of the National Association of State Utility Consumer Advocates, Elin Katz continues to advocate for utility consumers and underserved communities in her position leading Tilson's services for utilities, which include broadband consulting, community outreach, utility rate case support, and more. Learn more about our services for utilities

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What is a good price for a kilowatt-hour (kWh) of electricity? Most consumers have no idea how much a kWh of electricity costs. But that’s exactly what the proponents of deregulating Virginia’s electric markets expect people to know when they extoll the virtues of “shopping” for electricity.

In theory, electric “choice” sounds good, as more is better. The value of having options quickly falls apart, however, if you look at other states which have tried deregulation, only to find that the costs of electricity went up for customers who choose to purchase electricity from alternatives to their local power companies.

Currently in Virginia, the electric market is “regulated,” which means electric prices are reviewed and approved by the state regulator. The electric company cannot just raise prices without a highly involved process allowing for input from the public that ultimately requires government approval.

But under deregulation, electric suppliers can charge you any electric rate they want. An electric supplier offering you electricity at 15 cents per kWh may sound like a good deal – unless you know that the rate from your utility is 7.5 cents per kWh and that if you switch, you will have doubled your rate.

Deregulation takes a toll on consumers, especially their wallets. In my home state of Connecticut, we compared what consumers pay for electricity from these suppliers with the cost to purchase electricity through the “Standard Offer” from one of the state’s highly regulated electric companies.

Between October 2019 and September 2020, residential consumers who chose to buy from an electric supplier paid in aggregate $38,221,057 more than they would have through the Standard Offer. Connecticut is a small state and less than 25% of its residents buy electricity through an electric supplier – yet that small portion of residents paid over $38 million more for electricity. It is even more egregious over the long term: from approximately 2015-2019, Connecticut residents with electric suppliers paid an estimated $240 million more than those on the Standard Offer.

Other deregulated states see the same overcharges. Massachusetts Attorney General Maura Healey released a report on April 1 that found in the last five years, residential customers who purchased electricity from electric suppliers paid a staggering $426 million more on their bills as compared to their utility’s rates. An analysis by the Wall Street Journal released on March 8 found that consumers who signed up with electric suppliers paid a whopping $19.2 billion more than if they’d stayed with their electric utilities from 2010 through 2019, in deregulated states like Maryland, New York, Illinois, Pennsylvania, and the District of Columbia.

The sad reality is that the electric supplier market is plagued by predatory marketers who deal in half-truths, sketchy marketing pitches, and flat-out deception and lies. In Connecticut, regulators have fined electric suppliers millions of dollars and even banned some from the market for shady tactics like offering a plan with “guaranteed saver rates,” then ramping up the rate right after the customer switched (a classic bait and switch); lying about the Standard Offer rate; charging exorbitant electric rates in exchange for low-value or almost irredeemable airline miles; switching consumers to suppliers without authorization (slamming); and impersonating utility staff with hats and clipboards and telling customers they had to switch to the supplier immediately or their power would be disconnected.

Worse, these unscrupulous marketers target low-income, elderly, minority, and immigrant communities – those least able to afford a high electric bill – for these abusive and sometimes frightening tactics. They purchase lists of phone numbers from zip codes with low-income and minority residents to blanket them with calls. They bus their sales agents into low-income neighborhoods and senior complexes for door-knocking. One senior told me wearily that she has suppliers knocking on her door four or five times a day.

Recently, I joined a group called Power for Tomorrow to better educate consumers about the high costs of deregulation. I am taking this stand because deregulation means electric suppliers prey on consumers, especially those least able to protect themselves. Virginians should reject efforts to deregulate electricity for residential consumers and instead count on our electric utilities to provide electricity at a fair and reasonable rate, and for our regulators to ensure transparency and fairness in that process.

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Tilson provides expert testimony on utility issues before utility commissions, in media, and in front of  legislative bodies. Learn more about our services for utilities. 

Elin Katz

Elin Swanson Katz serves as Tilson's Vice President of Utilities. As the former Consumer Counsel for the State of Connecticut and former President of the National Association of State Utility Consumer Advocates, Elin continues to advocate for utility consumers and underserved communities in her work leading Tilson's utility services for both utility and government clients.

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