Boston-Area Residents Disenchanted, Disillusioned over High Utility Rates

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Boston-Area Residents Disenchanted, Disillusioned over High Utility Rates Source: Knight Ridder/Tribune Business News Publication date: 2000-11-10

Nov. 10--Steven B. Kovner of Shirley feels like deregulation roadkill. After being told by his utility that the price of his power will go up 68 percent next month, Kovner got on the Web and started looking for a better deal. But of the 13 residential suppliers licensed by the state, only one is operating in his area, and that company is requiring customers to sign up for local and long-distance telephone service in order to get a small price break on electricity.

For the first time since the state's electric market was deregulated in March 1998, hundreds of thousands of Massachusetts consumers, particularly those on so-called default service, are starting to shop around. What they're finding is that competition for their business is virtually nonexistent.

"I should not have to pay for default service unless there is an alternative, short of building my own power plant or living without electricity," Kovner said.

Customers on default service -- the 20 percent of electricity customers who started receiving service from their utility after March 1, 1998 -- will see the price of their power go to market levels Dec. 1. As they search for a better deal, they have one, or at best two, alternatives.

The rest of the state's electric customers, those on standard-offer power contracts, will probably face a similarly bleak competitive environment early next year when their rates are expected to go up. Utilities are currently seeking hefty rate hikes for standard-offer service to reflect their higher fuel costs.

Jake Edmund of North Andover said his futile search for competitive offers has confirmed his worst fears about electricity deregulation.

"All these deregulation schemes work the same way," he said. "They promise up front that you're going to save money, but it never works out that way."

For customers in Massachusetts Electric's service territory, there is currently only one alternative power supplier, and it's an alternative in name only. Servi- Sense.com of Newton offers a 5 percent discount off the customer's entire electric bill, but only if the customer also signs up for local and long-distance phone service.

The ServiSense deal is alternative in name only because the company isn't actually selling electricity.

Its customers continue to buy power from their local utility while ServiSense subsidizes a discount with revenue from its telephone operations.

In dollar terms, the savings aren't much. Starting Dec. 1, the 250,000 customers on default service in Massachusetts Electric's territory will see their power rates rise to market levels. For someone using 500 kilowatt hours a month, the monthly bill will rise 26.5 percent, from $48.57 to $61.42. ServiSense's 5 percent discount would save that customer $3.07.

For customers of NStar Electric, which operates Boston Edison and Cambridge Electric, the competitive outlook is only marginally better.

Those customers have a choice of ServiSense or Utility.com, the California-based power supplier currently offering a 20 percent discount off of the power portion of a customer's bill.

The Utility.com discount in most cases tops what ServiSense offers, but it may not last long. Utility.com officials say they are likely to move to a two-tier pricing scheme when the standard-offer and default service prices diverge Dec. 1, but they have not set new rates yet.

There are about 200,000 Boston Edison default customers. One using 500 kilowatt hours a month currently pays $61.79 a month. That will rise to $70.69 in December and, if a rate request is approved, $74.24 in January.

Officials say the higher electricity prices should draw more companies into the market, but don't hold your breath. They've been talking about competition being around the corner for several years.

To date, only 8,000 of the state's 2 million households are buying electricity from someone other than their local utility.

"It is likely going to take some time before consumers find a substantial number of companies offering choices to them," said David O'Connor, executive director of the state Division of Energy Resources.

There are actually fewer companies selling electricity now than there were two months ago. Essential.com, which offers consumers a bundle of energy and telecommunications services, stopped selling electricity in Massachusetts recently when its supplier, AllEnergy, pulled out of the market.

Frank Paraino, senior vice president at AllEnergy, said even at the higher default prices coming Dec. 1 the company can't buy power and sell it at a profit.

"I don't know when it's going to get better. I don't see anything imminent," he said.

Chris McKeown, president of ServiSense said his company is subsidizing a discount off of existing utility rates rather than selling electricity itself because the market is too unstable and suppliers are skittish.

"They are so apprehensive and so down on the marketplace that we keep doing what we're doing," he said.

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=15656122&ID=cnniw&scategory=Utilities

-- Martin Thompson (mthom1927@aol.com), November 10, 2000


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