CUB Report Warns Of Rip-Offs As IL Power Market Undergoes Major Changes

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May 13, 2014, 06:29 ET

CHICAGO, May 13, 2014 /PRNewswire-USNewswire/ -- Amid a 115 percent jump in consumer complaints about unregulated electricity suppliers, the Citizens Utility Board (CUB) released a report Tuesday that exposed some of northern Illinois' worst deals in a market that is much more treacherous for power shoppers than it was just a year ago.

Although CUB's report, at www.CUBSmartPower.com, stressed that many suppliers are acting appropriately, the watchdog warned consumers about getting scared into bad deals in light of recent headlines about a 38 percent hike in Commonwealth Edison's electricity price on June 1.

"Right now, it's a buyer-beware electric market in Illinois," CUB Director of Communications Jim Chilsen said. "We're getting complaints from power shoppers who thought they were signing up for one deal but then got slammed with some of the highest electric rates we've ever seen from alternative suppliers. Illinois' electric market is undergoing major changes right now, and our report shows that customers are paying dearly for it."

The most obvious change in the market has been increasing prices. For example, a review of electric offers in May 2013 versus May 2014 found that variable rates, which can change on a monthly basis, have jumped about 21 percent to more than 9.14 cents per kilowatt-hour (kWh). As of May 7, these were the highest rates CUB found: Viridian: 14.99¢ per kWh; Viridian: 12.99¢ per kWh; Starion Energy: 12.99¢ per kWh; Ambit Energy: 10.96¢ per kWh; Xoom Energy: 10.09¢ per kWh.

However, consumers have reported paying even higher prices. From January through April, CUB saw a 115 percent increase in complaints and inquiries about alternative electricity suppliers over the same period a year ago. These contacts ranged from simple questions about electric offers to something more serious:

An Oak Park man who signed up with Nordic Energy Services said he was told the chance of the rate going up was not likely—until it jumped from about a nickel per kWh to 21 cents per kWh.
A Chicago man signed up with Viridian for a rate that stayed at 5.2 cents per kWh for six months, but then changed to a rate that reached as high as 16 cents per kWh.
A Melrose Park woman with Major Energy said her rate jumped from an average of 7 cents per kWh to as high as 35 cents per kWh.

Illinois' electricity market has gone through dramatic change over the last year. Competitors to Commonwealth Edison, the regulated utility, were able to offer significant savings from 2011 to 2013, because ComEd was locked into higher-priced contracts. However, the last of those contracts expired last June, and ComEd's price plummeted. Then, one of Illinois' coldest winters ever inflated alternative supplier prices.

Rates for both ComEd and its competitors are expected to rise beginning June 1, due to a jump in "capacity costs," a fee that is wrapped into electricity prices. ComEd's rate will rise by 38 percent, from 5.5 cents per kWh to 7.596 cents per kWh, but it remains to be seen how alternative suppliers will react to the June 1 change in the market. If consumers are thinking of jumping to another supplier, they should beware of these pitfalls:

Exorbitant rates: CUB called on suppliers to be more transparent about their pricing. Consumers should ask for details on the price, and how it compares to ComEd's June 1 rate of about 7.6 cents per kWh.

Low introductory rates that disappear: Suppliers may try to lure customers into contracts with low introductory rates that shoot up after a short period. Always ask if the rate being offered is an introductory rate, how long it lasts, and what happens to the rate after the initial period.

Extra Fees: Ask if there is a monthly fee, and factor that into the per kWh price. Many suppliers charge exit fees of up to $175 if a customer leaves a plan before the contract is up. Under the law, customers are allowed to leave a contract without paying an exit fee within 10 days after the date of the first bill from a supplier.

In addition to bad deals, CUB's report also highlighted positive opportunities for consumers. New electric meters being installed by ComEd open the door to excellent optional programs that can save consumers money. For example:

ComEd's Residential Real-Time Pricing Program: This program charges a market rate that changes on an hourly basis, encouraging customers to put off heavy appliance usage until hours of the day when power prices are low. While not for everyone, ComEd said Real-Time Pricing in 2013 saved participants an average of 28 percent on the supply portion of their monthly power bills.

MC Squared Smart Value Power Program: MC Squared Energy Services is the first alternative supplier to offer a 12-month "time of use" plan, which charges customers a lower rate if they are willing and able to put off heavy appliance usage until an "off-peak" period of the day (7 p.m. to 7 a.m.), when electricity demand is low. This plan is only for ComEd customers with new digital electric meters.

Peak Time Savings. This program, which will begin in the summer of 2015, gives ComEd customers an opportunity to save money without risk. By signing up, consumers are credited on their electric bill when they reduce power usage during designated periods when electricity is most in demand.

For more information on these plans and how to sign up, visit www.CUBSmartPower.com.

CUB, Illinois' leading nonprofit utility watchdog organization, is celebrating its 30^th anniversary. Created by the Illinois Legislature, CUB opened its doors in 1984 to represent the interests of residential and small-business utility customers. Since then, CUB has saved consumers more than $10 billion by helping to block rate hikes and secure refunds over the years. For more information, call CUB's Consumer Hotline at 1-800-669-5556 or visit CUB's award-winning website, www.CitizensUtilityBoard.org.

SOURCE Citizens Utility Board