CUB Report Card Gives Illinois Retail Suppliers High Marks for $200 Million In Savings, But Warns Of Misleading Pitches, High Exit Fees, Major Market Shift

Electricity competition saved Illinoisans up to $218 million in 2012, the Illinois Citizens Utility Board said in a market report card, but CUB gave retail suppliers an overall grade of "incomplete" for, "reports of misleading pitches, a lack of innovation, and the looming question of whether they can offer savings after a major market shift this summer."

"It's good news that power shoppers have saved money in the short term, but Illinois is still in the honeymoon phase of electric competition," said CUB Executive Director David Kolata. "The Land of Lincoln power market is about to undergo a big test, and alternative electric suppliers should make key improvements."

CUB's report card graded the electric market in three areas.

Short-term Savings, A-: "With some exceptions, alternative suppliers have beaten utility rates, because Ameren and ComEd have been locked in higher priced power contracts. In general, municipal aggregation has offered the lowest rates—an average price of 4.85 cents per kilowatt-hour in ComEd communities, and 4.08 cents per kWh in Ameren communities. Compare that to ComEd's current supply rate of 8.3 cents per kWh, and about 5.4 cents per kWh for Ameren. CUB estimates that competition sparked $92 million to $218 million in savings in 2012," CUB said

"The big question facing Illinois' electricity market is how it will change on June 1, when the last of higher priced utility contracts expire and ComEd and Ameren rates are expected to drop," CUB said.

Consumer Protection, C: "Because of the expected drop in utility prices, CUB is concerned that many offers it is tracking charge 'termination fees' of up to $175 if customers want to exit a contract early. (It appears many municipal aggregation deals do not charge exit fees, but that is a good detail to check with local officials.) In addition, CUB has received troubling reports of misleading marketing. The reports often come from aggregation communities, such as Chicago, presumably because competing suppliers are racing to sign up customers before the community switches residents to its chosen supplier. Sales representatives may become more desperate as the pool of potential customers gets smaller and in the face of the expected drop in utility rates," CUB said

CUB warned Illinoisans to use extreme caution if a marketer:

1) Asks to see an account number or power bill before you've even decided whether you want to sign up.

2) Claims to be recommended by city or state government.

3) Claims to be from "the electric company," failing to clarify that he or she is not employed by the utility.

4) Offers a low introductory rate—that skyrockets after a month or two.

5) Promises that this offer will protect from utility rate hikes.

Innovation, D-: "A major weakness in Illinois' electricity market is that suppliers have focused solely on the price advantage caused by relatively expensive utility contracts—an advantage unlikely to last. Launching innovative programs that promote energy efficiency, money-saving technology, and dynamic pricing would make alternative offers more attractive after the market changes, but also better protect consumers from future market fluctuations. Yet, none of the suppliers have introduced creative offers, such as 'real-time' pricing, 'time of use' rates, or smart thermostat programs. CUB added that the City of Chicago's municipal aggregation deal has the potential to be a model for its consumer protections and its use of renewable energy and efficiency," CUB said.

Overall grade, INCOMPLETE: "A final grade remains to be seen, given market uncertainties and reports of misleading marketing, high exit fees, and the lack of innovation."

CUB recommends that alternative suppliers:

• Train their sales force better.

• Introduce innovative programs. "The most reliable way to help consumers cut costs is not to rely on the market, but to launch innovative programs that promote energy efficiency, money-saving technology, and creative pricing plans—such as 'time of use' or 'real-time' pricing," CUB said.

• Practice better transparency. "All alternative electric suppliers should promptly and accurately report their prices to the Illinois Commerce Commission (ICC) for display on the ICC's PluginIllinois.org website," CUB said.

• Eliminate exit fees. "Some electric offers don't charge any exit fees, which begs the question of why others charge $100 or more. CUB calls on all power suppliers to eliminate such fees," CUB said.

• Don't use utility logos. "Alternative suppliers should not use names and logos that are similar to regulated utilities. That can spark customer confusion," CUB said.