- The Washington Times - Friday, June 30, 2000

The day for Maryland residents to get a new electricity supplier finally has arrived.
Too bad no choices actually exist.
For months, homeowners and businesses have been inundated with advertising about how they will be able to pick which company will start supplying their power July 1.
But instant change won't arrive tomorrow with the flip of a switch under Maryland's electricity-deregulation plan.
True, 12 electricity suppliers have won licenses to provide power to residential and commercial customers. But none of them is ready to offer specific deals.
And another nine suppliers have applied for licenses and await approval from the Maryland Public Service Commission, which regulates utilities in the state.
"I think the whole thing is confusing, even though there is an educational campaign under way to alert consumers that the industry is changing," said Michael J. Travieso, head of the Maryland Office of the People's Counsel, a consumer-advocacy agency. "Most know something is happening but they don't what that something is."
What Marylanders will notice fairly quickly is lower electric bills.
But customers won't have their electricity cut off or experience power blackouts. That power will continue to be supplied by whichever company did so all along until and unless a customer chooses another provider once the suppliers have something to sell.
As the movement to open the electricity industry to competition moves across the United States, some Virginia customers will be able to choose new suppliers as early as September. The District can choose next year.

Learning the ropes

In the ad campaign that began in August, the Maryland Public Service Commission focuses on public awareness.
"July 1 is just the date in the legislation," said Al Cappannelli, director of media relations at High Point Franklin, a New Hampshire advertising agency that worked with Hunt Valley's Noble Steed Associates to create the campaign. "It takes time for a marketplace to develop after a 100-year-old monopoly."
The newly deregulated electricity industry is much like the long-distance industry, which was opened to competition in 1984 with the breakup of AT&T; Corp.
"Maybe over time the market will develop," said Robert K. Johnson, executive director of the Electric Consumers' Alliance, a group of consumer, government and business organizations that represent residential and small-business consumers on electricity issues. "Look, it took a decade for the long-distance market to develop."
When the market does develop, consumers should brace themselves for mailings, brochures, commercials and telephone calls encouraging them to switch electricity suppliers.
"You have to remember this is a competitive market," said Chrys Wilson, a spokesman for the Public Service Commission. "People will be inundated with brochures and telephone [calls] at dinner."
"Telemarketing like it or not works for companies and that's why they do it," Mr. Johnson said.

The more things change …

Electricity deregulation ultimately will affect 5 million Maryland customers, but not at the same time.
Competition will be opened Saturday to all customers of the state's four publicly owned utility companies: Potomac Electric Power Co., Baltimore Gas and Electric Co., Allegheny Power and Conectiv.
The current company will remain the source of electricity if none is chosen.
"Residential [customers] are winners even if they don't switch," said Michael W. Delaney, a spokesman for Constellation Energy Group, the parent company of Baltimore Gas and Electric Co. "The current is the same. It's going to be the bottom line that's different."
For instance, BGE's 1 million residential customers will pay a "standard offer service" price that is 6.5 percent lower than rates they were paying just two days ago. The "standard offer service" is the electricity service provided to customers who do not choose an electricity supplier.
BGE rates vary depending on the customer's rate schedule. For example, a resident who has electric heating will pay an average of 4.06 cents per kilowatt hour, the standard used to measure electricity consumption.
The difference now is that BGE is no longer making the power. Instead, the company is buying it from Constellation Power Source, at least for the next few years, Mr. Delaney said.
Pepco, which will stop producing the electricity, sold four power plants in Maryland and Virginia and recently signed a contract to receive its electricity from Southern Co. As a result, Pepco, which still will deliver and transmit the power, has cut its residential rates by 7 percent. Pepco's residential customers without electric heat will pay an average of 5.01 cents per kilowatt hour.
Pepco's average residential bill currently amounts to about $69 a month. The new rates mean that the typical customer will get a break of about $1.61 on the electricity itself.
To make matters more confusing, the companies that have obtained licenses to supply power include affiliates of the electric companies that currently supply the customers' power. While the names are similar, the energy suppliers are separate companies.
For instance, BGE Home, Constellation Energy Group's residential electricity supplier, eventually will sell to BGE customers, as well as all other Maryland residents, to get them to switch from the "standard offer service" to their service. The supplier and utility company cannot share information with each other about its customers.

… more they stay the same

When electric suppliers begin to make offers, consumers will use the default rate to compare prices. For now, would-be competitors say the "standard offer service" rates are too low for them to successfully compete and make money.
"There are no prices to offer to beat the standard offer service or even be competitive," Ms. Wilson said.
The summer may be another reason why they are not jumping into the market. Electricity costs substantially more during the hot summer months.
"Suppliers stay out during the high-cost months so they don't lose money the first couple of months," said Wayne Harbaugh, BGE's executive director of price strategies.
"Suppliers are holding back and waiting for prices to go down," Ms. Wilson said. "We anticipate suppliers will not make any offers until the fall."
Conectiv Energy Supply, a subsidiary of the electric company Conectiv Power Delivery, plans to enter the Maryland market in the fall.
Electricity prices are too high for the Maryland-licensed electricity supplier to offer "value or meaningful savings" to the customer, said Tim Brown, a Conectiv spokesman.
"The average Maryland customers are just beginning to get their mind around this issue," he said.
Essential.com, based in Burlington, Mass., is waiting approval from the Public Service Commission to sell electricity in Maryland. Once that happens the company will partner with a company that makes the power and then resell the electricity to customers, said spokesman Joe Palladino.

Understanding choice

Nearly 68 percent of the nation's consumers favor being able to choose their electricity suppliers, according to a survey by the Edison Electric Institute, which represents investor-owned electric utilities and industry affiliates.
However, few residential customers are familiar with the subject. In fact, 69 percent said they are only slightly or not at all familiar with electricity competition, according to the November survey, the last one conducted.
"The interest level is high," Ms. Wilson said. "People are always curious and want to know how it is going to affect their pocketbook."
In April, the Maryland Public Service Commission began a $5.6 million public service campaign to educate Marylanders about the change in the electricity industry. The agency's Web site (www.md-electric-info.com) provides an electric choice guidebook and general information about Maryland's industry.

Removing the monopolies

Electricity is one of the last industries to be deregulated in the United States. Until now, electric companies have been legal monopolies regulated by the government. Deregulation opens the doors to competition throughout the country.
Under the new system, electric suppliers will provide the supply or generation of electricity, while the local utility company still will transmit and distribute that power. The three elements of electric service supply, transmission and distribution will be split up on the customer's electric bills.
Residents still will call their local utility company to report any problems.
Maryland is one of 26 states, with the District, that have implemented some kind of customer choice or are gearing up for it within the next two years.
The fact that Maryland has no choices yet is "not unusual," said Jamey Gessaman, marketing programs manager at Wattage Monitor Inc., an Internet site that lists the country's electricity supply offers available by ZIP code.
Wattage Monitor, based in Reno, Nev., allows users to compare prices among the electricity suppliers in their area through its Web site (www.wattagemonitor.com). Some services can be ordered through the site.
Many of the states that have implemented deregulation don't have a variety of electricity suppliers.
"Generally, there has not been a mad rush to serve the residential market," Mr. Johnson said. "The residential market is not an attractive market to serve. Rates are fairly reasonable. It's difficult for a provider to come into a market when the margin is so small and the cost is so high."
However, "standard offer service" rates that are too expensive will open the door to competitors offering cheaper rates.
Philadelphia electric customers have 26 offers to choose from because the local utility companies have set such high rates. New electric suppliers can beat those prices and still make money, Miss Gessaman said.
But even when they have a choice, electric customers don't necessarily switch.
Allegheny Power, which services 182,000 Maryland residents, saw only 2 percent of its total 675,000 Pennsylvania customers switch to another supplier. The rest stayed with Allegheny, said spokesman Scott Shields.

Luring customers

Since prices are so low in Maryland, suppliers will have to offer other services or new products or tout advantages such as environmentally safe technologies.
For instance, electric suppliers in the future may bundle together services like a customer's Internet service, long-distance phone service and electricity supply, Mr. Travieso said.
That's what Essential.com has done in other markets and plans to do in Maryland, Mr. Palladino said. Essential.com may not offer the lowest price but it will give customers the convenience of signing up through it to get all the services that come into their homes.
Electricity suppliers will offer new and improved products like devices that turn power on and technology to reduce environmental hazards.
When the offers finally begin to roll in, Mr. Travieso advises customers to "do nothing." They don't have to make a decision, and they are paying lower rates.
Ms. Wilson said the abundance of information from suppliers will give customers the "opportunity to do their homework, research and explore the best possible supplier that meets their needs."
"The key choice belongs to the consumer, not the competitor," Mr. Johnson said.

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