Power Deregulation - any feedback about third party suppliers?

[DA]

So, PA now has deregulated power AND the rate cap removed. I understand so do a dozen or so of other states in the nation. As soon as this happened the third party suppliers started calling offering to switch to them. One in particular - North American Power - calls every two weeks or so. I tried to lookup any customer feedback about them but all I see on the Net are rave reviews written by people actually peddling their services. Apparently they have a small army of independent sales people working for them and some of what I saw looks quite like an MLM scheme (as in several tiers of sales commissions involved etc.)

What confuses me about this particular deregulation (I'm very familiar with telecom deregulation from years back) is that they claim that all my service tickets, customer support etc. will still be handled by my current utility company, I just send money to NAP, that third party supplier.

From what I can gather, the difference in rates is $0.01 per kW. It's about 8% reduction but I'm not sure it would justify getting into some arrangement I don't understand. And some third party suppliers also have early contract termination penalties, just like cell phone companies do.

So, has anyone jumped into the power deregulation fray yet? Can you give some feedback about any third party power suppliers or NAP specifically? Thanks!

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[John Grabowski]

*NJ deregulated several years ago with the same result. Third party suppliers were coming out of the woodwork. They are all gone now, but a new one has been promoting its services lately. Deregulation promotes a lot of competition and the rates are under a lot of pressure. Not much room for a profit like before. After deregulation, as an electrical contractor I noticed a considerable drop in services from the power companies. They now have less inspectors with larger territories among other things. One power company now charges for services that were free beforehand with a minimum charge of $280.00. I would just keep the company you have now until the dust settles and you can see who is around for the long term.

[DA]

Thank you, John. I think wait and see is probably the most sensible thing to do at this point. There are 16 of those third party suppliers now as far as I can tell. Time will tell how many will survive on the profit margins they have (there is also at least $0.01 difference between those suppliers, so some definitely earn less than others)

It is unsettling to hear that the deregulation caused drop in services but it feels like we've been there before. After the telecom deregulation AT&T also became the worst provider to deal with as far as quality and the choice of services. Looks like monopolies never learn how to compete and start cutting corners as soon as the monopoly's gone.

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[dpb]

On 3/9/2011 12:56 PM, DA wrote: ...

...

From 30 years supporting the generation-side of the business as generation equipment (commercial nuclear) vendor and consulting, I don't understand how anybody can think there's an advantage to be gained by allowing a 3rd-party brokerage outfit to resell power purchased from some other generation company and then resold and distributed over transmission lines financed, built, serviced and maintained by somebody who is then not supposed to make any money keeping that infrastructure available 95+% of the time irrespective of weather.

Does not compute.

Of course the generation/distribution company has to somehow cover their cost and return sufficient ROI to even survive, what more continue to provide additional generation to support growth and meanwhile meet all the increasing regulatory burden.

--

[Peter]

Here in MD we have had deregulated electricity production for several years. Of course the rates have continued to go up despite the (minimal) competition and my one and only choice for transmission (PEPCO) has made national news for their extremely unreliable service and poor storm recovery record.

I've switched producers at least twice. It is very easy here. There are web sites where you can determine who is an available producer for your area. Each producer has a web site that describes the plans they offer. Some plans are locked-in fixed cost per KWH, others have floating rates that may change almost monthly. (Analogous to the difference between a fixed rate mortgage and an ARM.) All plans are implemented with a one year contract. It is easy to comparison shop on the web for the plan that you believe will keep your costs lowest, or most compatible with your commitment to spending more for "green" energy production.

Each year, a few months before the expiration of your existing contract, you get a letter in the mail offering to renew your contract for another year (by doing nothing) and any change in the contract terms is described in detail.

If you want to change your plan you are free to do so with no penalty. All you have to do is sign up for a different plan with the same producer, or a plan of your choice with a different producer. If you change producers, you don't even have to notify your current producer. Apparently there is a common database that keeps all parties on the same sheet of music.

Regardless of which producer you choose, you receive a single monthly bill from the transmission company, itemizing the production charges and the transmission charges.

There is nothing mysterious or intimidating about the process here. Do we really save enough $ to justify the deregulated structure? Absolutely not; in fact, energy costs have probably gone up much more than they would have had we remained regulated. However, unless the MD State legislature rescinds the current law, we're stuck with it.

I hope you have a better cost-saving experience in PA.

[Ed Pawlowski]

Here in CT I use Dominion, but Con Ed is also very competitive. l Easy to switch, no cost to cancel, same service as before, but I save about $15 a month. If your setup is the same, you'd be crazy not to switch. Just be sure it is a no charge cancel.

[Tony Hwang]

Hi, Up here in Alberta dereg. was bad. Looks like costs went up. I had locked in rate which I picked for 7 cents/KWh which will last for

3 more years. After than who knows?

[JoeSpareBedroom]

I took away all of your writing except for the most important part. No matter how much money you might theoretically save, NEVER jump into a deal you don't understand.

[clare]

Up here in Ontario, deregulation brought out all the crooks, liars, and theives in droves.

[JIMMIE]

From what I have seen the 'Power Companies" that have been added are nothing of the sort. They buy power from the same company you were doing business with to start with and selling it to you on the same equipment you had. They aren't in the electricity business they are in the "CASH FLOW" business.

Jimmie

[Ed Pawlowski]

"JIMMIE" wrote

Exactly. Some months ago the Harford Courant had a good article explaining how it all works. I buy power from you, add just a tiny bit to it and sell it to the next broker. He adds a tiny amount and moves it along. Finally, the consumer gets it, but they have also contributed tons of money to a few brokerage giants along the way.

[krw]

If it were capitalism, parasites would be impossible. Crony-capitalism, is

*NOT* capitalism.

[Robert Green]

Thanks for the lead!

(In case anyone else is interested)

Some choice quotes: ================================================================== "Every day we delay [deregulation], we're costing consumers a lot of money," he said. "It can be done quickly. The key is to get legislation done fast." His name?

Jeffrey Skilling of Enron.

==================================================================

"Probably six out of the 187 legislators understood it at the time because it is incredibly complex," Cafero said. "If somebody says, `No, we didn't screw up,' then I don't know what world they're living in. We did."

==================================================================

But Joseph Brennan, the Connecticut Business and Industry Association's longtime chief lobbyist at the state Capitol, said the energy world is so complex that it is a premature oversimplification to say deregulation is already a failure. Businesses have fared better than homeowners as large industrial users have more leverage to gain a better price than the average residential customer using a relatively small amount of electricity in a single-family home.

========================================================================

[HeyBub]

Oh, but capitalists DO create. They create WEALTH!

Other economic systems devote their efforts mainly to redistributing the wealth that already exists, not in creating new wealth.

In the scenario outlined, EVERY SINGLE PERSON left the transaction better off than before they entered into it.

[Ed Pawlowski]

I hate to sound like a Democrat Liberal, but if a couple of the middlemen stayed out of the loop, the consumer would have a few bucks a month in his pocket and some hedge fund billionaire would not have as many millions. Making money buy selling what you make is great capitalism, adding layers of costs for no good reason (other than a few people making lots of money) not quite as good.

[HeyBub]

In general, no. The supply chain is only as strong as its weakest link (to coin a pithy saying). Consider the following:

• Farmer Co-operative Commodities broker Cannery Wholesaler Grocery store

• Consumer

Remove any one of the folks in the middle and you either prevent the comsumer from getting her can of peas or introduce enormous inefficiencies. That is, the housewife COULD drive to the country, buy a half-gallon of peas from the farmer, cut, cook, and can them herself. Or she could do without.

Not every step in the above scenarios is a "value-added" step. At least not in the sense that a raw material was transformed in some way. The Green Giant doesn't want to buy a peck of peas from a single farmer; he doesn't even want to buy the entire output of a single farm. The Giant wants the output from FIVE HUNDRED farms.

The product didn't change - there was no "value added" to the peas. The only thing that the cannery insists upon is thousands of tons of peas!

On the other hand, there's the story about a chap who owned a warehouse full of canned sardines. He sold them for ten cents a tin. The guy who bought them for ten cents, turned around and sold them for fifteen cents. The fellow who bought them for fifteen cents then sold them for a quarter.

The buyer who paid a quarter went to the warehouse and opened a can. Immediately, he complained to the man from whom he bought them:

"Those sardines are inedible! They're rancid!" he exclaimed.

The seller shrugged and said: "Those sardines are not for eating. They are for buying and selling."

[HeyBub]

Yep. The most powerful nation on the planet. One country that produce one-quarter of the world's GDP.

Giggle. What "thing" does a university education produce? Or a judge in a civil court?

Civilization has progressed through several distinct modalities:

• Hunter-gatherers

• Agrarian societies

• The Industrial Revolution

Each required massive upheavals in the fabric of society. For example, farming required families to stay in one place and not roam for food. Industrialization caused the growth of cities and incumbent institutions (factories, orphanages, the church, schools, transportation, etc.).

Today, we are on the verge of a new paradigm: The Information Age. This new age will put paid to the industrial society in as profound a way as the steam engine society replaced traditional farming. Oh, there will still be people who MAKE things, just as there are people (corporations) that GROW things. But just as farming went from 70% of the population to 10% as the industrial age took over, making "things" will likewise diminish as knowledge becomes king.

Why do you hate children? The pre-teens of Sri Lanka and Bangladesh are now earning twenty-five cents an hour making sneakers, whereas before they were living in poverty.

[HeyBub]

Well, yeah, but at least these kids have something they didn't have before: They have CAPITAL!

Some - possibly most - will splurge with their new-found wealth by buying ice-cream cones. Others will save and invest their proceeds, possibly by starting a shoe-shine stand or a pee-wee loan-sharking operation.

Their future is immeasurably brighter, simply because the western world allowed them to make the "things" we want.

It's for the children.

[bud--]

Last number I heard was $7.5M, which was high by a factor of about 20. Maybe if you stopped listening to loonies....

Modern conservative apparently means someone who will believe anything.

Like Glen Beck.

Like Clinton people trashed the White House for incoming Bush administration.

Like Obama is a muslim.

Like death panels.

Like $16M cleanup.

Like recent Obama trip cost $100M per day (Michelle Bachman).

Or recent Bachman congratulating people in New Hampshire that "you're the state where the shot was heard around the world in Lexington and Concord."

[krw]

It's got *nothing* to do with capitalism. Such nonsense can only exist because of government.