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April 21, 2014 Experts Corner

Know your options in the supplier market

Katie Dykes

Recent events in Connecticut's competitive electric marketplace underscore the need for customers to understand their electric bills and competitive service options to make the best choices.

Electric bills for Connecticut Light & Power (CL&P) and United Illuminating (UI) customers are divided into two parts: delivery and energy. Delivery rates recover the cost for distribution (local poles and wires), transmission (high voltage system), hardship, and other socialized costs and expenses. Delivery rates remain regulated by the Public Utilities Regulatory Authority (PURA) and are not open to competition.

The energy portion of the bill (commonly referred to as generation services) recovers the cost to generate electricity and is open to competition. Customers can choose a licensed supplier or CL&P or UI to provide generation services.

Utility standard service is the generation option CL&P and UI provide. It is available to all residential and small-and-medium business customers. Large business customers can choose utility last resort service, which is the term used to describe generation services for customers with monthly demands in excess of 500 kilowatts, or a licensed supplier.

Licensed suppliers offer an alternative to utility standard service and last resort service rates. Most suppliers offer fixed and variable rate plans that may lower costs, as well as renewable energy rate plans that allow customers to support increased renewable energy investments.

This winter, constraints on the availability of natural gas to supply power plants led to dramatic increases in wholesale prices for electricity. That led to higher generation rates charged by licensed suppliers to customers who selected a variable-rate plan, or were placed on a variable-rate plan when their fixed-rate contract term or promotional offer expired.

Anecdotal evidence suggests that some customers who switched to a licensed supplier may not have paid close attention to their supplier contract or the generation rate on the electric bill. Customers can be caught off guard when rates change or their plan converts to a variable price.

In light of these events, customers should examine their monthly electric bill and underlying supplier contract. Customers with questions regarding the terms, current rates, or future rates of their supplier contract should pose them to their chosen supplier. Customers who want to return to utility standard service must contact their utility. The typical switch will occur on the next meter reading date, but customers can request an immediate switch to standard service effective within two business days of the request.

Standard service rates change twice a year — on Jan. 1 and July 1 — and are fixed for the subsequent six-month period. PURA oversees the process CL&P and UI use to procure standard service. The new approved standard service rates are posted 45 days before their effective date on and the CL&P and UI websites. This gives customers a six-week window to compare standard service rates to offers from licensed suppliers. This is important information customers should review when considering generation supply options.

Last resort service rates for large business customers take effect at the start of each calendar quarter. Separate monthly rates are established within each quarter. These rates are also reviewed and approved by PURA 45 days before taking effect and are posted to the three websites cited above. Last resort service rates are updated more frequently than standard service and bid closer to the time in which the rates will be charged. As a result, these rates more closely reflect the current market than standard service rates.

Why does this matter? Last resort rates may provide customers a sense of current market conditions — rising or falling trends — that customers can consider if they are in the market for generation services.

Customers can save money by participating in the competitive market for generation services but should pay attention to the terms of their contracts. Customers can always remain on — or switch back to — the regulated, utility-sourced, standard service. Competitive service options are at the heart of the electric marketplace. As with all markets, the most successful participants are those who understand their options. n

Katie Dykes is the deputy commissioner for energy at Connecticut's Department of Energy & Environmental Protection.

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