Why a plan to drive down electric prices in Mass. led to higher bills
By Miriam Wasser | Wbur
Like most people, Noemy Rodriguez never gave much thought to various charges on her electric bill. All she knew was that the $80 a month she was paying Eversource felt like too much.
So when some salespeople knocked on the door of her East Boston apartment a few years ago and said they could sign her up for “a state plan” that would lower her bill, she was intrigued. The two men — one of whom spoke Spanish — also said they were working with the city, so she felt like she could trust them.
“I thought this was going to benefit me,” she said through an interpreter. “I was so ignorant.”
Massachusetts is one of about a dozen states where residents can choose to buy electricity from a supplier other than their default utility. When lawmakers set up this system in the late 1990s, the assumption was that a competitive marketplace would result in lower power prices for customers. But for the most part, the opposite has happened.
Noemy Rodriguez near her home in East Boston. (Robin Lubbock/WBUR)
It's not entirely clear what happened, but Rodriguez ended up on a plan with really high and variable rates. Some months, her bill totaled more than $200, and she struggled to pay what she owed.
Rodriguez had no idea she was buying power from a so-called competitive supplier because her monthly electric bills were still coming from Eversource.
“I see this problem all the time because energy bills are, frankly, really hard to decipher,” said Devin MacGoy, a community organizer with the nonprofit GreenRoots.
Your utility typically charges you for two services: The power it buys on your behalf in the wholesale market and the cost of maintaining the wires that bring electricity to your home. Each of these things represents about half of your monthly bill.
If you enroll with a competitive supplier, the only thing that changes is that a third-party company buys power for you. Your utility still delivers your power, and you still write it one check every month for the total amount on your bill — your utility then pays your supplier what it’s owed.
This system of “consolidated billing” was intended to make things simple for ratepayers, but it also makes it easy to miss that you have a competitive supplier, MacGoy said.
“Many residents are surprised when I tell them that they are receiving their electricity from another company, because the bill comes from Eversource and the name of the [competitive] supplier is written on their bill in very small letters,” he said. It can be especially confusing for residents with limited English proficiency, he added.
Your electric bill has two parts: supply and delivery. Usually, you pay your utility for both parts. But if you have a competitive supplier, a private company buys power for you. To keep things simple, you still only write one check a month, and your utility pays your supplier what it's owed. (Sample bill courtesy of Eversource. Annotation by Sara Plourde/NHPR)
This is what happened with Rodriguez. She and MacGoy work together at GreenRoots, and last fall, she brought him a stack of her utility bills, hoping he’d help her find a way to save money. He picked one up and immediately saw that she had a competitive supplier.
He also saw that some months, she was paying three times more for electricity than she needed to. Unlike utilities, which need to get their rates approved by the state, competitive suppliers can charge whatever they want.
"What these companies do is, even if they offer a lower price to start with, they jack up their price later down the line," he said. "And so folks end up paying way more than they should be."
MacGoy was able to help Rodriguez switch suppliers, and she now pays a much lower flat rate for electricity every month. But across the state, more than 516,000 households are currently enrolled in plans with competitive suppliers. And for most people, it’s not a good deal.
Talk to critics of the competitive supply industry, and you start to hear a lot of similar stories. Older adults with dementia who don’t remember a salesperson coming to their door. Recent immigrants or other residents who don’t speak English fluently given contracts in English to sign. People with intellectual disabilities who were duped into signing contracts they didn’t understand. Salespeople who claim they’re working with your utility or your city.
About a decade ago, the Massachusetts Attorney General’s Office started getting a flood of complaints about competitive electric suppliers. When Nathan Forster, chief of the energy and telecommunications division, and his team started looking into the matter, they assumed the problem was limited to a handful of predatory companies.
Turns out, it isn’t “a few bad apples.” Forster said the office has not found a single case of a company that has been able to charge customers less than a utility over a multi-year period.
“Less than 10% of suppliers in a given year provide savings,” he said. “And when it happens, those savings are often very small.”
If people save money, it’s usually a couple dollars a month — and it's often because of temporary introductory rates. By contrast, the average consumer loses about $200 annually.
And those losses add up.
New data from the Attorney General’s Office shows that between 2015 and 2021, ratepayers in Massachusetts spent $525 million more than they needed to on electric supply charges.
“The more and more you look at it, the more and more you realize that the business model just doesn't work,” Forster said.
While utilities are not allowed to make money on the power they supply you — they make money elsewhere — competitive supply companies need to profit on the sale of electricity.
"And unfortunately, what happens is when you have [an industry] where the businesses can't make money honestly, they start making money dishonestly," he said.
This problem isn’t unique to Massachusetts. Eleven other states, plus Washington, D.C., have similar retail electric markets for residential customers, and investigations in several of those jurisdictions have found similar problems.
“Every study says the same thing; this industry, this market leads to large customer losses," Forster said.
Those losses don’t affect everyone equally.
“I think the biggest thing that makes me frustrated about the competitive electric suppliers is that traditionally they have gone after the people who can least afford the predatory product that they're offering,” said Rev. Mariama White-Hammond, chief of environment, energy and open space in Boston.
From what she’s seen as the city’s top energy official, suppliers seem to target people of color, lower-income residents, older adults, non-native English speakers and, increasingly, college students, many of whom are paying utility bills for the first time.
State data bears some of this out. Using demographic information about which households qualify for subsidized electricity rates, the Attorney General’s Office has found that lower-income residents and communities of color are disproportionately harmed by this market.