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You have just moved into your new apartment and need to set up electricity service so you call your local utility company (National Grid, Eversource, or Unitil); within hours you are enjoying your favorite television show. One day someone comes to your door and tells you about lowering your utility costs, asks to see your utility bill, and then suddenly you are signed up for a contract and now have two utility bills and you didn’t even know what you signed up for. This situation has become a frequent occurrence since Massachusetts restructured its electricity industry allowing competitive suppliers (companies other than the local utility companies) to sell electricity directly to you. While potential savings are out there, sometimes the potential savings are more trouble than they are worth.

The Office of Consumer Affairs and Business Regulation provides this information to help you understand the electricity market and balance your options.

About Your Electricity Service and Billing

When you initiate electricity service, be aware that unless you select a month-to-month variable rate, the local utility company will set you up with their “basic service” at a fixed-rate. The local utility company sets its generation rates through private contracts and the wholesale electricity market, which is regulated by the Federal Energy Regulatory Commission (FERC).  Your electricity bill is split into two sections, the “delivery” and “supply” sections. Delivery charges are what the local utility company charges you for delivering and transmitting electricity;  these charges will always be paid to the local utility company, whether you buy your supply from them or not.  Supply charges are for the electricity you use; this is the only portion of your bill that will change if you decide to get your electricity from a competitive supplier rather than through the local utility company’s basic service. Additionally, if you switch you could end up receiving two electricity bills, one from the local utility company for delivering the electricity to you and another from the competitive power supplier you switched to for supplying the electricity (see Your Bill for a guide on understanding your bill).

Competitive Energy Sellers

When you are ready to begin shopping around for a better rate, you may consider dealing with a broker or a competitive supplier directly.  For a list of licensed brokers and competitive suppliers visit the official website of the Executive Office of Energy and Environmental Affairs (EOEEA).

  • Brokers:  A broker or consultant is a licensed agent who acts as a “middle-man” between you and the electricity company. The broker acts on your behalf, but does not take title to energy at any stage of the process.
  • Competitive Suppliers:  Competitive suppliers are licensed energy sellers who hold title to energy and sell it directly to consumers.  Frequently, competitive suppliers will hire independent sales agents to go door-to-door for the purpose of signing people up for their service.

Dealing with a broker or a competitive supplier may or may not lead to lower rates or savings on your supply cost, compared to what you are currently paying with the local utility company’s basic service.  There is no way of predicting the cost of supply because the electricity market is highly volatile.  Factors such as the cost of fuels, cost of maintaining power plants, weather conditions, and regulations affect not only the cost of supply to the supplier, but  the cost suppliers pass on to you.  Competitive suppliers are not regulated by the FERC and often do not disclose how they set their rates.  The best way to protect yourself from being taken advantage of by unscrupulous competitive suppliers or brokers is by understanding your choices and knowing your rights as a consumer.

Comparing Plans

Although promotional offers may be appealing, there are a number of factors that may affect the amount you will actually end up paying for your electricity.  It is important to review your options and compare them to the local utility company’s basic service before switching.  Asking the following questions can help you make an informed decision.

  1. Are the energy prices (rates) fixed, or will they change throughout the term?  If your energy consumption is consistent, fixed rate plans will offer less variation in your monthly bill.  Variable rate plans, however, fluctuate more often because the rates can change by the hour, day or month, etc., according to the terms and conditions in the competitive supplier’s disclosure statement.
  2. What is the length of the contract?  Consider how long you will be locked- in to the contract and what that means in conjunction with the rates.
  3. Is there an initiation/transfer charge?  If there is an initiation fee, you could be paying more.
  4. Does the contract contain an introductory price?  If your contract contains an introductory price, then your supply cost may increase substantially after the introductory pricing period ends.
  5. Are there minimum bill amounts?  If so, consider whether you consistently use the minimum amount of power.
  6. Are there cancellation fees?  Consider whether you will have to pay a cancellation fee or other fees at cancellation whether or not you terminate the contract before its expiration date.  It is common to pay early termination fees if you cancel the contract before it expires.
  7. How does renewal work?  Consider that if you do not make a decision to renew or cancel a contract within the permitted period the competitive supplier may renew your contract and change its terms.
  8. What is the price per kWh?  Calculating your usual monthly kWh consumption times the price per kWh will help you compare supply cost.
  9. What is included in the price per kWh?  If you can find out how the company sets its rates, you can make a more informed decision.

Know Your Rights

  • If you change your mind about switching to a competitive supplier, you can rescind the contract within three days of signing without incurring any charges.
  • Competitive suppliers may not switch you to their service without your authorization.
  • Competitive suppliers cannot shut off your electric or gas service- only the utility company can.
  • Complaints against brokers and competitive suppliers can be filed with the Department of Public Utilities.

Consumer Tips

  • Check your electricity bill periodically to ensure that you have not been switched to a competitive supplier without your authorization.
  • Competitive suppliers may contact you over the phone or in person. If you feel pressured, do not sign or consent to anything. The electricity market is complex; take your time comparing suppliers.  If you sign a contract and change your mind, take advantage of the three day grace period.
  • Proceed with caution when dealing with door-to-door solicitors. They tend to use high-pressure sales tactics; some may even misrepresent themselves as being from the utility company in order to get your attention.  Utility companies will never call or send someone to your house to discuss supply rates.  Complaints regarding deceptive marketing practices can be filed with the Attorney General’s Office.
  • If a competitive supplier offers perks, read the fine print and consider all the factors before switching.  Attractive perks may be outweighed by high rates or fees.

 

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