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June 5, 2017

It Looks Like Junk Mail, But Ignoring It Could be Costly

Filed under: Uncategorized — Edgar (aka MrConsumer) @ 6:20 am

[Note: Although this story is about certain Massachusetts towns, the same thing is likely happening around the country.]

Last week, tens of thousands of Massachusetts residents in a couple of cities and towns found letters like this in their mailbox:

Somerville envelope

With a little prior knowledge of what sales pitches from alternative electricity suppliers look like, this appears to be just another one of those letters promising savings if you choose them instead of your regular electric company. Even though it has the name of the city (Somerville) in the return address window, it lists an energy company name (Dynegy) and an address in Illinois, not Massachusetts. So many people might simply toss the letter out as junk mail.

A similar letter from the same company also went out to residents of Brookline, Massachusetts last week. Here is the front page of it:

Brookline electricity letterClick letter to see full size.

Surprisingly, the letter really was sent on behalf of the town. It suggests that the town has bulk buying power when purchasing electricity for thousands of residents and businesses and thus has negotiated a plan “to provide you with competitive choice, longer-term price stability and more renewable energy.”

Good news, right. Not so fast. There are three big catches.

*MOUSE PRINT:

“There is no guarantee of future savings. The primary intent of the program is to provide price stability and savings over the duration [a 30 month fixed price contract] shown above. … Rates may drop below the program rate during any given six-month and three month period.”

So, first strike: no savings are guaranteed.

*MOUSE PRINT:

The details get worse. At the bottom of the page is the first unambiguous statement of what is really going on here.

“As an eligible participant, your account will be automatically enrolled in the program unless you choose to opt out.”

What, you are deciding for me what electric company is going to supply my power? Yep. Every resident and business in town will be automatically switched away from their current electricity supplier, Eversource.

Since when is a negative option plan legal that lets a seller impose its services on you unless you take action to stop it? If this were legal in other commercial contexts, we’d all be getting letters from swimming pool installers saying that next Tuesday a new pool is going to be installed in our backyards unless you call to stop it. Unbelievably, the Commonwealth of Massachusetts passed a law some 20 years ago allowing cities to set up “municipal aggregation plans” like this, and foist it onto their citizenry automatically as long as they allowed people to opt-out. How anti-consumer! These aggregation plans are not limited to Massachusetts, incidentally. Some states have had them for five or more years already and take a similar approach.

We’re not done yet with this bad deal.

*MOUSE PRINT:

rate chart

To add insult to injury, the rate per kilowatt hour that everyone in Brookline is involuntarily being placed into is about 5% higher than the rate currently being charged by the regular electric company.

Dynegy charges $0.11098/kWh, while Eversource’s rate is only $0.10759/kWh. So much for the savings in the short term because the town was buying electricity in bulk. It should be noted that should everyone’s current electricity supplier go up in price during the next 30 months, people on the new plan may indeed save some modest amount of money.

The only way a Brookline consumer can get a lower rate than their current electricity supplier through Dynegy is to affirmatively opt-in to its basic plan rather than the default plan that the town chose for everyone. In that case, people will save just over one-third of one cent per kilowatt hour of power used. Woohoo!

Of course, saving money is not the only reason that cities adopt these aggregation plans. The hope is to force its citizenry into an electric plan that gets a good portion of its power from renewable energy sources like wind or solar power. In the case of Brookline, the default plan gets an additional 25% of its power from renewable sources.

On balance, we think that consumers should be offered these greener electricity plans, but they should be sold based on their merits and residents should not be forced into them involuntarily (even if there is a no-penalty way to opt-out).

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13 Comments

  1. The mailer appears to be written based regulatory fiat rather than business copywriter – NJ has similar dry language requirements in their community energy aggregation program opt-out notification mailers.

    Several other states have adapted these electricity community aggregation programs. As Edgar mentions, in some cases the goal is dollar savings while in other cases the goal is meeting renewable energy objectives. Typically these goals are mutually exclusive. In fact, the letter states that Brookline Basic Option 2 is lower priced than current service but has no renewable energy content.

    But, to me, that is not what is potentially misleading. The “Current Service” rate in the right column is actually the summer rate specifically for Basic Service customers. The winter rate is lower than even the Non-Renewable Brookline product. (See https://www.eversource.com/Content/ema-c/residential/my-account/billing-payment/rates-tariffs/basic-service) Although that is explained in the “Duration” row, it is confusion (possibly by regulatory fiat & communication design). As many homes in the area use more electricity in the winter than the summer, even Brookline Basic can be a money-loser for homes in the near term.

    A useful alternative would be to show what the annualized cost of electricity in a typical home in the area would be based on seasonal usage & price averaging. Or, if regulations allow, show a side-by-side comparison based on actual usage.

    Edgar replies: Marc, you raise some excellent points. Just an FYI, however, that summer vs. winter rates for electricity supply here are no longer much higher. The current winter rate on my Eversource bill is $.10318 vs. their $.10759 summer rate starting next month.

    Comment by Marc — June 5, 2017 @ 7:51 am
  2. I am supportive of renewable energy and upgrading the power grid, but it is odd that the renewable energy option isn’t just integrated into the public utility. Perhaps smaller companies are more efficiently able to integrate the power into the grid?

    This post has encouraged me to conduct research on the subject of renewable energy for public utilities. Thanks.

    Edgar replies: Wayne… state law in Mass. does in fact require a certain percentage of electricity provided to come from renewable sources. I think it is 12.5% currently, but don’t hold me to that. These aggregation plans allow cities and towns to choose plans that go above and beyond the state minimum. So for example in the case of Brookline, the town opted for a plan that provides an ADDITIONAL 25% of renewable energy sources above the state minimum.

    Comment by Wayne — June 5, 2017 @ 8:46 am
  3. Does anyone know if letters like this went out in Quincy? I received something similar regarding my electric service which I spent about two seconds looking at before shredding. Now I’m worried. Guess I’ll need to keep a close eye on my bill.

    Edgar replies: Jim… according to a story in the Brookline Tab, Quincy is not one of the other Mass. cities or towns affected (yet). Arlington is next to go “green.”

    Comment by jim — June 5, 2017 @ 8:55 am
  4. I also received something from this company and also shredded it. Any idea if Worcester residents were sent these?

    Edgar replies: Chet… Worcester is not. However, here is a full list of applications submitted to the DPU for these plans. http://web1.env.state.ma.us/DPU/Fileroom/dockets/bycasetype (Select “municipal aggregation plans” from the dropdown menu.

    Comment by Chet — June 5, 2017 @ 10:46 am
  5. I say all of these types of companies need to go under. Sure you might save some big time bucks over the time of the contact, but then you could wind up paying more in like year three.

    The so called companies can be very shady in their practices.

    Comment by Richard G — June 5, 2017 @ 11:40 am
  6. Preventing this sort of thing is one of the reasons I ran for a seat on my city council. (And won! I’ve been serving 3 years now in our Missouri town of 4000 residents.) Ten or so years ago it was Mayor Bloomberg regulating the size of soft drinks. Last year, it was Philadelphia taxing sugared (and non-sugared) beverages. People have GOT to keep an eye on what their governments are doing. Politicians often assume too much power and use it ways that hurt you.

    (PS- I’m not the same Richard who posted above.)

    Comment by Richard — June 5, 2017 @ 12:33 pm
  7. Sorry Richard, but this is nothing at all like those other issues that you cited. The only real problem with this is the, perhaps intentional, perhaps just clueless, deception. This should be an opt-in, not an opt-out program, it should be well publicized and the letters should be clearly identifiable as something official that needs our attention, as opposed to the junk mail on the subject that lands in our boxes on a regular basis.

    Comment by jim — June 5, 2017 @ 1:12 pm
  8. Remember the phrase (paraphr+ased) “I’m here from the government to help you.”

    Watch out for too much help.

    Comment by blasher — June 6, 2017 @ 12:46 am
  9. could you please put the link for the full lost of applicant cities. Somehow the link did not get published.

    Edgar replies: Nancy, I updated that other comment. But here is the link to the full list:

    http://web1.env.state.ma.us/DPU/Fileroom/dockets/bycasetype

    Select “Municipal Aggregation Plans” from the dropdown menu.

    Comment by Nancy Sing — June 6, 2017 @ 7:32 am
  10. I believe this happens in Ohio as well. It’s super annoying that I have to waste stamps on sending the opt out cards back. The aggregator sent me “we’re changing you” notices twice within 6 months after I moved in to a new house.

    Comment by Marc K — June 7, 2017 @ 11:17 pm
  11. Here in central New York, I’ve gotten these types of letters a couple of times a year – and the usual phone calls, another one yesterday, as well. My NYSEG supply rate has always been lower. As an aside, NYSEG has sent me two emails in the last month asking me if I’d like a new “SMART METER” so that they can help me to control my thermostat. Uh, no thanks. But I don’t doubt that at some time in the near future, they will stop asking, and start telling. That’s how these roll-outs, be they meters or Windows 10, are done.

    Comment by Marty — June 8, 2017 @ 6:49 am
  12. 1. I moved to a different residence a few months ago and was given a new Eversource account number – this number is made up in part my SSN. I have filed complaints, FTC, DPU. Please check your Eversource account number – it should not include any part of your SSN.

    2. I received the aggregate, etc. city/town notice which was sent to me with a letter from Dynegy, Inc. which included my Eversource account number. My account number should not be disclosed especially given the SSN situation.

    3. Under no circumstance would I have chosen Dynegy, Inc., bad scandal ridden history which includes Bankupty in 2012.

    Comment by Massachusetts — June 20, 2017 @ 3:08 pm
  13. i thought action by inaction was illegal ?

    if someone sends you a contract for work at your house and you ignore it then by what the town is saying is the contractor can do the job because you did not say no ????

    does the town have the legal right to switch your electruc supplier without your permission ??

    If so what are your rights if you don’t want this.

    Edgar replies: Rich, you are correct, in most cases silence does not constitute acceptance. However, in this case, Massachusetts law allows cities and towns to use negative option.

    Comment by rich w — June 21, 2017 @ 9:20 pm

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