Opinion: Annapolis Showdown on Utility Rip-Offs

Utility
Pok Rie/pexels.com.

This is the year the Maryland General Assembly needs to act. For years advocates having been trying to stop third-party energy providers from ripping off low-income and elderly customers on fixed incomes.

Since 2014, Maryland families have paid $750 million more for their deregulated electricity and natural gas supply. Maryland households, especially vulnerable households, have been losing money by being duped into switching from their regulated utility to a third-party energy supplier.

The Energy Supplier Reform Bill SB31/HB397, designed to fight unscrupulous sales practices, has been heard in both the House Economic Matters Committee and Senate Finance Committee. The Senate Finance Committee has voted the bill out with an amendment favorable to the industry.

As the director of advocacy for AARP Maryland, I ask the committees to vote yes for SB31/HB397 with the amendments accepted by both sponsors. And I ask all Marylanders — including our 870,000 members, ages 55 and older — to call or write their respective state representatives and urge them to vote yes.

We know, and lawmakers know — and we know they know — that low-income utility customers, many of them retired, are getting hammered with price gouging, and they have been getting hammered for years.

Third-party energy suppliers and regulated utilities buy energy from the same power plants. Deregulated suppliers however have no price regulations and through tricky contracts, sell energy to customers at an introductory low rate. But then the prices are jacked up and consumers are on their own figure out if they’re saving or losing.

Even finding the rates to compare is tough on the mind-numbing utility bills. The result is the bulk of deregulated customers are duped and paying far more than originally promised for an essential service.

This scam is due to the Maryland General Assembly voting in 1999 to deregulate Maryland’s electricity industry. Lawmakers figured competition would lower prices. But over more than two decades, it slowly began to backfire, and Maryland households now pay among the nation’s highest rates.

Door-to-door agents go to low-income neighborhoods, especially in Baltimore City, promising lower prices but eventually delivering higher ones. They have stood outside Baltimore’s social services offices to sign up people. They have handed out “Save 20 percent” coupons to folks who apparently didn’t know that part of the deal was leaving a regulated supplier for an unregulated one.

About 30,000 families in low-income ZIP-code areas get state energy assistance grants to help pay their utility bills. New data from 110 energy assistance BGE accounts show that, on average, families with third-party energy suppliers pay $650 more per year than they would have with regulated rates.

The Energy Supplier Reform Bill has been described as the first-ever measure to fix Maryland’s “dysfunctional energy supplier market.” It would require third-party energy suppliers serving low-income families on Maryland energy assistance to charge the same, or lower, electric and natural gas rates as the regulated utility rates.

That would be a clear message Maryland doesn’t tolerate the exploitation of its citizens.

A 2018 study funded by the Abell Foundation found that in 2009, a decade after the General Assembly opened the door to electric retail competition, a new policy change, purchase of receivables, which shifts the risk of default from suppliers to regulated utilities, helped the deregulated market to “take off. And, for the next few years, consumers did see some benefits.”

“From 2014 to 2017, however, Maryland households have been losing money by using third-party suppliers — paying about $255 million more in all than if they had stayed with their regulated utility’s supply offer,” the study showed.

At the hearings before the House Economic Matters Committee and Senate Finance Committee, a co-author author of the study, Laurel Peltier, an AARP volunteer advocate, testified before those committees. She estimated that about $15 million annually in state grants — ostensibly to pay down utility bills of low-income households — is flowing instead to enrich energy suppliers.

It’s not right. We know it’s wrong. So let’s finally fix it, support retail choice yet responsibly spend state funds and, most importantly, keep our lowest income senior families’ utility bills protected.

— TAMMY BRESNAHAN

The writer is director of advocacy for AARP Maryland.