Just when consumers have become familiar with natural gas pricing choices, the electricity market has begun causing confusion.
For natural gas, as I’ve said before, I’m still recommending the Standard Choice Offer (SCO), or monthly variable assigned through Dominion, and following a state-approved formula. You can read about this online at www.ohio.com/betty.
For electricity, I’m not able to give you the same clear-cut answer.
Everyone has an individualized “price to compare” figure each month that is calculated based on electricity usage. That “price to compare” wording can be found on your bill on the left side under “messages.” It is the price that you would have to beat to save money.
What is best for you might not work for someone else. You have to assess risk and consider the wild card of energy prices in general.
I can’t tell you what I’m doing in particular because I live in a community served by municipal power and am not an Ohio Edison customer.
A few things to keep in mind: The “price to compare” changes monthly. There are summer and nonsummer rates for Ohio Edison. So take a look at a few different months’ figures.
Only part of an electric bill, called the generation portion, is “shoppable.” That’s about 55 percent of your bill. The other 45 percent is set by regulators and cannot change.
You can do nothing and stay either with Ohio Edison’s default service price, or in many cases, your community might have an aggregation and signed a group rate with FirstEnergy Solutions (FES). That is FirstEnergy Corp.’s subsidiary, so you are already saving. Check with your community to see whether you are in an aggregation, but the FES offers are for 6 percent off your “price to compare” through May 2015 with a $25 cancellation fee. Those of you who are with that offer are actually in the third year of a nine-year deal through 2018. You will have the 6 percent off for the remainder of the term. The aggregation has an opt-out policy, meaning you were automatically included unless you opted out. So by law, you are allowed to leave for free every three years. That’s why the 2015 date is in place.
This year, a lot of other players entered the retail electricity market, and some have been aggressive with mail, phone calls and television ads.
To do your research, go online to the Public Utilities Commission of Ohio’s site called “Apples to Apples” at www.puco.ohio.gov or call 800-686-7826.
When looking online, make sure you scroll down on the electricity chart to the “FirstEnergy Service Area Offers.” The Ohio Consumers’ Counsel also puts out a comparison chart at www.pickocc.org.
A recent letter to aggregation customers of FirstEnergy Solutions offered them another FES product — a seven-year, 7-cent fixed rate through 2019 with a $300 cancellation fee for the first three years and $75 for the remaining years. This is an opt-in offer, which means you will stay with your aggregation’s 6 percent off the “price to compare” deal, unless you say you want the other offer.
Consumers have questions about the long time frame, saying that besides their mortgage and car loan, they weren’t sure they should lock into anything that long.
FirstEnergy Solutions spokeswoman Diane Francis said some customers wanted longer contracts. The company also wanted to differentiate itself, since no other offers go that long.
“This is our way of putting offers out there that may suit some customers’ needs and not others,” Francis said. “Energy experts say that right now we’re at a very low point in the market and that’s not sustainable. Prices are going to start increasing and this product is for those people who eventually see an increase in the market.”
Francis acknowledged that for people who are already on an FES aggregation deal of 6 percent off their “price to compare” through 2015, switching to the seven-year-deal would not give them upfront savings, but possibly there would be savings over the long term.
Both Greg Slone, senior energy analyst at the Ohio Consumers’ Counsel, and Kim Wissman, director of the PUCO’s Department of Energy and Environment, said they had never heard of an electricity offer as long as seven years.
“I don’t necessarily think it’s a bad thing,” Slone said. “What FirstEnergy Solutions is saying is true. It depends on the person.”
If someone is interested in guaranteeing a generation price for seven years at a point when the prices are somewhat down, this might be an offer to consider. But Slone said the cancellation fee was pricey.
His colleague, Beth Hixon, assistant analytical director at the consumers’ counsel, said the agency has often counseled that a percentage off is a guaranteed savings and that aggregation groups often can negotiate a good deal for a large group.
As for the rate, “they’re obviously not going to come out with a rate for seven years below today’s rate,” Slone said.
The average annual “price to compare” for a residential customer, according to FES, is 6.20 cents per kilowatt-hour. The summer price is 6.86 cents and the nonsummer is 5.28 cents.
Slone said there’s no way to know if it’s a good deal until after seven years.
He said no one can predict electricity prices and a variety of energy issues are factors. There is the low price of natural gas. Also, there are coal-powered plants being retired.
Wissman said wholesale market auctions are seeing record lows now, but increases are expected the next four years. When coal-fired plants are replaced with natural gas, prices could stay level or go down. But there could be construction delays, she noted.
Slone said the FirstEnergy Solutions 7-cent offer tells him that the company feels pretty comfortable that gas prices are going to stay down.
Both Kissman, Slone and Slone’s colleagues at the Ohio Consumers’ Counsel expect more offers to join the market. Some could be based on “time of day” rates, or prices that are different depending on the hour to encourage electricity use during off hours.
The $300 cancellation fee for the first three years makes me pause. If you agree to a high cancellation fee, make sure you want to stay with the contract.
Some other retailers also have some high cancellation fees. If you switch from one FES contract (the 6 percent off) to the seven-year rate, there will be no cancellation or switching fees.
The seven-year offer is available to any residential customer in FirstEnergy territory. NOPEC, the large aggregation group of 585,000 customers mostly in northern Ohio and parts of Summit, Portage and Medina counties, is notifying members of a slightly different offer by mail later this month. The NOPEC phone number to get information is 877-204-0426.
NOPEC customers currently have 7 percent off their “price to compare.” They will also get the seven-year offer, but the price will be 6.75 cents and a $75 cancellation fee.
NOPEC Executive Director Chuck Keiper said it is one more option for NOPEC customers. Consumers choosing either offer will still be considered aggregation customers and that will not affect the group’s negotiating power. (Francis said that’s the case for other customers in other aggregations as well.)
“We think that most people won’t choose it. On average, these kinds of offers are picked up by 1 to 5 percent of the market. For us, that’s not a lot of people, but for those people it’ll be an important option,” she said.