Sixty percent of the active retail gas sales plans offered by unregulated retail marketers in Illinois are bad deals that would have cost customers more money than sticking with their state utility supplier, according to an analysis done by the Citizens Utility Board (CUB), a state watchdog group created by the state legislature.
“Competition in the natural gas market is being sold to consumers as a way to save money on their gas bills,” CUB Executive Director David Kolata said. “But as our new Gas Market Monitor shows, you currently have better luck at the blackjack table than you do switching natural gas suppliers. And, unfortunately, you need a crystal ball to figure out if you’ll be one of the winners.”
CUB has developed a new webpage with tools designed to help customers make informed decisions when switching gas suppliers. CUB said it’s not a crystal ball but does show the prices of all 789 alternative natural gas plans that have been marketed to consumers since 2003. Of those plans, 291 have expired and 477 are still active. A gas supplier defaulted on the contracts of an additional 21 plans. Most of the plans require customers to sign a one- to five-year contract.
Of the 291 expired plans, the monitor shows that consumers lost money on 57% of them. Consumers saved on 37% of the plans. The average loss was $97.23, while the average savings was $183.89, CUB said. Of the plans still in effect, 60% would have cost consumers more money to date. CUB said the savings and loss estimates are based on typical usage of 1,325 therms a year, allocated by monthly consumption. Offers still in effect were analyzed through February. CUB’s market monitor will continue to analyze these plans monthly.
Eight firms currently are participating in the state customer choice programs in the territories of Nicor Gas, Peoples Energy and North Shore Gas. According to 2005 federal data, only about 161,000 residential customers have chosen an alternative gas supplier.
CUB said that alternative suppliers generally have offered two types of rates: a fixed rate locked in for a period of one to five years, or a variable rate tied to an index that changes monthly. But the initial rate offered under both types of plans is almost always higher than the utility price at the time, meaning the utility price would have to increase substantially to make the offer pay off.
Since the state retail market was opened to competition in 1998, CUB has argued that it was “ripe for abuse.” CUB noted that alternative gas suppliers face little state oversight and “often mislead customers by using the same name and logo as the regulated utility company.” One company, Santanna Energy Services, reneged on its fixed price offers because customers were saving too much money (see Daily GPI, Oct. 19, 2005).
“With the price of gas so volatile, consumers desperate to save money have become easy prey for the often aggressive and misleading marketing from alternative suppliers, whose personnel go door-to-door and usually are paid a commission for each customer they enroll,” CUB said.
For more information on CUB’s Gas Market Monitor, go to https://www.citizensutilityboard.org.
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