Two Suppliers Depart New Jersey's Electricity Race

Source: Knight Ridder/Tribune Business News Publication date: 2001-02-02

Feb. 2--It's getting harder to shop for electricity in New Jersey, now that two of the biggest marketers in the state have pulled out. Energy America and Power Direct, which served two of every five New Jerseyeans who went shopping for new electricity suppliers, said this week they were withdrawing from the market.

The two companies were hit by the same kind of squeeze -- buying power high and selling low -- that is causing California's electricity crisis, with its rolling blackouts and prospect of sharply higher power bills. For them, it made it impossible to make money.

Consumers, meanwhile, say it's getting hard to tell if any of New Jersey's electricity and natural gas marketers really want their business, said George Riepe, acting director of the Board of Public Utilities' division of energy.

He asked the board earlier this week to require electric and gas marketing companies to report monthly on whether they're actively seeking customers or not. A handful of companies, including Green Mountain Power and the New Power Co. still are marketing in New Jersey.

New Jersey deregulated the electricity business in 1999, allowing customers to shop around for their supplier. About 100,000 customers have switched. The withdrawal of Energy America and Power Direct may be a sign that letting companies compete for business is harder than it looks, some experts said.

"The fewer reputable companies that do business, the less likelihood that consumers are going to benefit," said Staci Berger of New Jersey Citizen Action. "One or two companies is not a competitive market."

With few companies competing for customers, Berger fears there will be nothing to hold back big increases in electricity bills once New Jersey's caps on utilities' rates come off in 2003.

Energy America and Power Direct say they had a hard time beating the utilities' capped rates. They have to buy electricity on the wholesale market, where prices exceed 5.5 cents a kilowatt-hour, while the utilities charge customers roughly a nickel for the same amount of power -- which is enough to keep the lights on and appliances running for an hour in typical house.

"The market turned upside down," said Michael Drago, vice president of Power Direct. "We were losing money on every kilowatt-hour we sold."

Power Direct will pay customers lump sums equal to any savings it promised until customers' contracts expire, Drago said.

Energy America, which last year paid a $280,000 fine to settle a state probe in complaints it misrepresented its program to consumers, felt the cap on utilities' rates was too low, said spokesman Nick Fulford.

New Jersey, like California and other states, put a cap on utility rates hoping to create a stable base for competition.

"New Jersey has done the best of all, because consumers can get savings of up to 20 percent," said Paul Rosengren, spokesman for Public Service Enterprise Group, which owns the state's biggest utility. "The whole idea was the transition is going to take time, and when wholesale prices are down so there's some margin, the marketers are going to come pouring back in."

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-- Martin Thompson (mthom1927@aol.com), February 03, 2001