If You’re Thinking About Leaping into the Third-Party Electric Market…


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Most years, nearly every electric customer in Connecticut buys their electric supply through Eversource or United Illuminating, rather than attempting to navigate the market of third-party suppliers that was set up when Connecticut deregulated its electric utilities in 1998.

Every Eversource and United Illuminating customer has the right to buy their electric supply from a third-party – but those third-party contracts usually end up costing customers more money. 

But the news that rates for Eversource and United Illuminating will increase more than 40 percent in January – increasing the average customer’s bills by about $85 and $79 a month, respectively – has sparked new consumer interest in third-party suppliers, which are for now offering significantly lower rates.

If you are thinking about taking the leap, here are some keys to keep in mind.

Use the Energize CT rate board

Consumer Counsel Claire Coleman said the number one piece of advice she would give to electric customers shopping for a third-party supplier is to use the Energize CT Rate Board, where customers can compare real-time offers from suppliers to their current Eversource or United Illuminating supply rate.

Coleman said the board is the best way to compare offers and reduce the chance falling victim to aggressive and sometimes misleading sales tactics commonly used to enroll customers. 

In one case settled this year, Discount Power was fined $2 million and barred from operating in Connecticut after state regulators said they found a pattern of the company’s representatives misleading and even lying to elderly customers to push them into signing contracts.

“One of the things we’re always concerned about is customers being exposed to more aggressive or misleading tactics, like a door to door salesperson who comes and talks you through a rate, but doesn’t provide all of the information,” Coleman said.

Shop around and cancel your contracts

Suppliers offer contracts of various lengths on the rate board, but don’t worry about being locked into a contract. Every customer of a third party supplier in Connecticut has the right to cancel their supply contract at any time, with no early termination fee.

So unless you entered into a long-term contract at a very low price, there isn’t much reason to stay with one contract for its entire term. 

“If you’re going to contract with a supplier, it’s not a set it and forget it thing,” Office of Consumer Counsel Staff Economist JR Viglione said. “You’ve really got to stay on top of it. And if you do that, then there’s a good opportunity to save money.”

“But if you’re not interested in periodically checking and switching contracts, and switching on and off standard service, then it’s probably not the right thing for you,” Viglione said.

Marc Hanks, Director of Regulatory Affairs for NRG – one of the largest retail suppliers in the U.S., which sells power in Connecticut under its subsidiaries Direct Energy and Xoom Energy – said it makes sense for Connecticut customers to be actively shopping considering they can’t be charged cancellation fees.

“If you decide that, the rates are changing and standard service is more attractive, or that you’d like to consider another retail supplier that might have a better product or a better rate, they can make that switch,” Hanks said. “And they can do that without any penalty.”

Prices will fluctuate, so check regularly

Prices change constantly on the third-party supplier market, compared to the standard service rate from Eversource and United Illuminating which is adjusted twice a year.

Last year was an anomaly because of a chaotic global energy market, but generally prices will be lower in the summer than the winter. New England’s electric grid is largely powered by natural gas, so prices are higher in the winter when gas is also used for home heating. 

That’s why Eversource and United Illuminating customers pay higher rates from January to June, and lower rates from July to December. While Eversource said it expects to remain high overall for the next few years as the Russian invasion of Ukraine disrupts global energy markets, the dynamic where prices are lower in the second half of the year is expected to continue.

Hanks, with retail supplier NRG, said it’s best for customers to be proactive with their suppliers. If a customer has a supply contract coming up for renewal in January, they don’t need to wait until prices spike on Jan. 1 to switch, he said. 

Generally, it’s better to lock in a price on the “shoulder months” of a big change – meaning customers should shop in the fall and spring when rates are not “exorbitantly high” or increasing, he said.

Coleman recommended at least setting a six-month reminder when the standard service rates change –usually announced about a month in advance, in June and December.

“It’s a lot to ask a customer, and that’s where we caution customers that, while these three-year rates are a good deal right now, you really have to stay on top of it,” Coleman said.

Standard service often isn’t a bad option

In 2022, third-party suppliers have generally been a cheaper option than the standard service rate. According to data from the Office of Consumer Counsel, customers with third-party suppliers have saved about $11.3 million – and in October about three-quarters of Eversource customers with a third-party supplier saved money.

Hanks credited Direct and Xoom’s relatively low prices to how they buy power. While Eversource and United Illuminating hold auctions throughout the year with rules governed by the state, third-party suppliers are less constrained, he said.

“We’re assessing where the market might be 24-36 months out, or anywhere in between, and it’s that future look and our hedging strategies that allow us to offer a more competitive rate,” Hanks said.

Over the last decade, however, third-party suppliers have been a bad deal for the majority of customers. Since the OCC started tracking the data in 2015, this is the first year customers with third party suppliers have saved money overall. In total, customers have paid nearly $300 million more than they would have if they just stuck with the standard service rate in that time, according to OCC.

There have been some concerns that larger, multistate third-party suppliers can charge lower rates upfront to convince customers to sign up, knowing that most customers won’t continue to actively shop and will end up paying higher rates down the line.

Coleman said it’s a concern of her office that customers won’t keep up with price changes over the course of a long-term contract. Viglione said it’s hard to say how individual companies are charging lower rates because each has their own business models.

“But we do know that it’s more costly for them to acquire customers than to retain them,” Viglione said.