Energy Auction Debate Leads to Customer Losses

State lawmakers are in the process of deciding whether or not the retail electricity accounts of Connecticut Light & Power and United Illuminating will be auctioned off to private marketing companies. This is an attempt to raise cash for the state, even though it will cost the 665,000 CL&P customers. Starting on July 1st, these 665,000 customers were expecting reduced rates of about 5-8%. Now, this price cut is not going to happen. This is because the power companies could not guarantee energy traders that they would still have their large customer base for the remaining half of the year. Without this guarantee, they were unable to lock in lower rates. Now these rates will remain unchanged and nobody will be able to take advantage of the lower market prices. The states power procurement manager Jeff Gaudiosi said “even with the specter of this auction being there, we lost all of our buying power for 2013 and into 2014.”

From the perspective of the government, this auction could raise around $80-$100 million, a nice boost to the state budget which is why Governor Dannel P. Malloy is pushing for it. If the auction could bring lower rates to customers, it should be done, if not, it would be a very unsuccessful attempt. If the state were to take this money from the auction, it would basically be a large tax. Private marketing firms are willing to pay significantly more per account, and it is only logical that the paying customers should see some of this money on their end. To put it in perspective, in the year 2000 the market was moved from the power companies to private marketing firms. These marketers have been trying to sell at rates they claim are better than average. 47% of customers have taken that route.

Those individuals who don’t switch will stay with CL&P or UI and will be paying based on a state approved buying strategy. Now the standard offer is 7.615 cents per kilowatt hour at CL&P. Regardless, customers will be paying a monthly bill to either company at the same regulated distribution rate.

According to Malloy, customers would be segmented into blocks of 100,000 and auctioned off as groups. The proposal states that anyone could opt out of the auction and continue paying standard rates. Marketers would not be allowed to charge for switching, and they would have to offer a 5% discount below the standard rate for the first 12 months. As good as this sounds, that 5% is based on the current price, where customers would have seen that as a minimum of savings because of market conditions. This is just an estimate as we cannot know for sure.