Electric deregulation backers overpromise, ignore ugly truths

By Gary Meltz

In a recent Mercury op-ed, a supporter of deregulating Virginia’s electricity markets promised that creating competition for Dominion Energy would result in great benefits for Virginians, including: “fixed-price power contracts for one, two or three years and other services to reduce electricity consumption.”

The author himself has been a paid consultant to one of the companies that would offer these competitive “contracts.” He didn’t mention that this company, Direct Energy, has been penalized by state regulators in Connecticut for ripping off their customers.

Here is how a Connecticut newspaper characterized the state government crackdown on Direct Energy, “The Public Utilities Regulatory Authority fined Direct Energy, the state’s largest electricity supplier, $1.5 million for misstating standing service prices, misleading customers on generation charges, charging excessive cancellation fees and not accurately explaining rates, state officials said.”

Allowing Direct Energy to begin selling electricity in Virginia might create competition, but with Direct Energy’s checkered past, it doesn’t seem like it would mean lower electric bills for Virginians. In fact, the opposite.

The problem with competitive markets isn’t unique to Direct Energy. If we look across the nation at other states that have deregulated their electricity markets, it becomes clear that competitive suppliers don’t always save people money on their power bills.

In Massachusetts, since 1997, thanks to competitive suppliers, customers have paid $426 million dollars more for their electricity than if they had stuck with their local power company.

This is why the attorney general of Massachusetts (a Democrat) and representatives from the governor’s office (a Republican), recently testified in the state legislature that it is time to admit deregulation was a mistake and end competitive electric supply industry in the Bay State.

As Attorney General Maureen Healey told the Committee, that multiple investigations of the competitive electric supply market, “show that this is a broken industry that’s just not capable of following the law that continues to drain funds by deceiving Massachusetts residential customers.”

A representative from the Massachusetts governor’s office told the same committee, “It’s clear that individual competitive supply market for residential customers has not delivered on its promise of lower rates for residential customers … In fact, the evidence shows that it has increased rates, particularly for the state’s most vulnerable residents and is causing them undeniable harm.”

Speaking of targeting a state’s most vulnerable residents, like senior citizens, the advocacy director of the AARP in Connecticut, recently penned an op-ed opposing a bait-and-switch tactic that competitive suppliers use to cheat people called “auto-renew.” Sign up for a good deal, but get “auto-renewed” into a contract that over time locks customers into outrageously high rates.

For a national perspective, consider an analysis by the Wall Street Journal of U.S. Energy Information Administration data. The Journal found that “U.S. consumers who signed up with retail energy companies that emerged from deregulation paid $19.2 billion more than they would have if they’d stuck with incumbent utilities from 2010 through 2019.” The Journal added that in nearly every state where third-party suppliers operate: “they have charged more than their incumbent utilities in each of the five years from 2015 through 2019.”

Ultimately, deregulation doesn’t mean lower electric bills. It only means a proliferation of competitive suppliers who act as middlemen, and profit by focusing their deceptive marketing practices on the least sophisticated customers. If Virginians want better services from their local electric company, they should work within the existing regulatory framework to ensure that Dominion Energy lives up to their commitments. But allowing companies like Direct Energy, into the Commonwealth, is a serious mistake if you care about lower electric bills and protecting Virginians from predatory companies.

Gary Meltz is the executive director of Power for Tomorrow, which advocates against utility deregulation. It is supported in part by Dominion Energy.