Does it pay to switch from ComEd?
Eric Bogoff of Wheeling has been mulling a switch from ComEd after receiving materials from other companies touting electricity at a lower cost.
“I have a couple of these advertisements I received in the mail and I am investigating the possibility of making a change,” Bogoff said.
Brian Kaniewski of Gurnee also has seen ads for the companies. But he hesitates.
“I'm not sure if this would benefit us or burn us with electric bills,” Kaniewski said.
They're not alone. Thousands of suburban residents have received promotional materials, seen billboards or heard radio commercials touting any number of alternative power suppliers that compete against longtime electrical utility ComEd. These competitors — Spark Energy, Constellation New Energy, BlueStar Energy, Direct Energy and others — have been entering the market since deregulation started more than a decade ago with the promise of savings on the price of your power.
How do consumers know if switching really is a good deal? As in many deregulated industries, you'll have to do your homework and ask questions, consumer advocates advise.
First, recognize that no matter who supplies your electricity, the infrastructure of wires and stations that deliver your power is owned by ComEd. If you're concerned about power outages, like those from recent severe storms, switching suppliers won't make a difference. And part of your monthly bill will continue to include a delivery rate that goes to ComEd.
That's one reason ComEd isn't upset by the competition. In fact, Chicago-based Exelon Corp., parent to ComEd, proposed a merger with one of those companies, Constellation, which could happen by next year.
“ComEd is still making its money on the infrastructure charges, so the level of those who switch won't have much of an impact on ComEd's bottom line,” said Travis Miller, associate director of utilities for Chicago-based Morningstar Securities Research.
The Illinois Commerce Commission's fourth annual report issued Tuesday said about 83,000 customers have switched away from ComEd as of June 24 and since deregulation started in 1998. ComEd said its customer base has remained at about 3.8 million in northern Illinois for the last two years.
Still, consumers are confused about what a competitor will provide versus ComEd, how reliable the new company will be, and whether it's a good deal.
Consumers considering a switch should take a close look at their recent bills to see what they pay per kilowatt hour and what portion of the overall bill pays for the price of energy, said Illinois attorney general spokeswoman Robyn Ziegler.
It's important to compare the price of electricity from ComEd, which is regulated by the Illinois Commerce Commission, with the offers from an alternate supplier.
“The bill that consumers receive from their regulated utility provides information regarding the historic usage and the current price, which can be used for that comparison,” Ziegler said. “Sometimes it is not really an apples-to-apples comparison, depending on the terms of the contract.”
Also, a contract with a new supplier fixes the price. “It is important for that consumer to understand that a fixed price will not go up, but it also will not go down,” Ziegler said.
So if the regulated price goes really high, the consumer who signed up with an alternative supplier could save some money. But if the regulated price goes way down, that consumer will pay the contract price to that supplier regardless.
Remember that the delivery rate can continue to go up, based on increases authorized by the ICC. So you won't escape any increases on that portion of the bill, experts said.
Pay attention to other provisions before you sign any contract, Ziegler said.
There are currently far fewer protections in place for customers of alternative electric suppliers than there are for customers of regulated utilities. For example, there are no limits on the termination charge an alternative electric supplier can impose on a customer who wishes to end a contract, Ziegler said.
Many alternative suppliers include cancellation fees, some for around $180.
The ICC is in the process of approving rules to regulate the behavior of alternate power suppliers. There are laws in place to keep an alternative supplier from switching a customer's electric power service without authorization.
ComEd has long supported competition in the marketplace and supports the right of customers to choose who supplies their power, said ComEd spokesman Antonio Hernandez.
“ComEd works with the entity to electrically connect the alternative energy generation to the grid and accept the output of that generator into the grid,” Hernandez said.
ComEd remains responsible for the electricity distribution as well as the system's maintenance, reliability and outage restoration, Hernandez said.
Houston-based Direct Energy, with operations in Oak Brook, is a state-authorized supplier that is currently offering 6.89 cents per kilowatt hour, or a 13 percent discount, compared to ComEd's rate through the summer months.
The company entered the Chicago suburban market in February and has heavily marketed to area consumers, said Cory Byzewski, vice president and general manager of Direct Energy's residential business, based in Pittsburgh.
It's hoping to tantalize consumers with a no-penalty promotion. Those who sign a contract based on its promotional price could be locked in for a year without penalty if they decide to leave early. If they sign again, there may be an early termination fee, he said.
“We can't say we'll never do that,” Byzewski said. “At the end of their first year, they have other options and a new fixed price and they may have a cancellation fee.”
“The more competitors, the better the market will be,” said Byzewski.
Still, the Citizens Utility Board urged consumers to educate themselves before signing any contracts. The Chicago-based watchdog has had a handful of complaints, but dozens and dozens of inquiries on what these alternative suppliers mean for consumers, said CUB spokesman Jim Chilsen.
“Consumers are really hungry to get solid information about these alternative suppliers,” Chilsen said.