By Beth Levine
When Clay Zambo opened his December 2014 electric bill, he was rendered speechless.
“I knew usage went up in the winter, but this was ridiculous,” he said. His November bill had been $265; December was more than $700. What happened?
Zambo, 54, of Norwalk, had fallen prey to a variable-rate contract from a third-party electricity supplier, a practice AARP Connecticut is helping to shut down.
Variable-rate contracts offer low teaser rates for a few months. Consumers sign up, not fully realizing that after the initial term ends, the energy supplier can jack the rate way up without notice. Customers are then on the hook for that amount until they can switch providers (which may take months), and they may be charged a cancellation fee.
Or, as in Zambo’s case, residents sign a yearlong fixed contract. When it ends, they are rolled into a variable-rate plan with little or no warning.
“I actually did get a notice, but it was the day before it went into effect, so there was nothing I could do about it,” said Zambo, who switched to a standard-offer supplier before the next billing cycle.
John Erlingheuser, AARP Connecticut advocacy director, said there are two big problems with variable rates:
- Unlike in other business transactions, consumers use the electricity first and are told what their rates are later.
- Unlike credit cards or mortgages, where customers know how the variable rate is calculated because it is tied to an economic index, electric variable rates are based on market conditions.
“But there is nothing that defines what those conditions are, so you can’t figure out what your rate would be or how it’s affected by the economy,” Erlingheuser said.
“Seniors and low-income people are particularly vulnerable to the tactics that the third-party suppliers use,” he said. “I’ve had so many calls from seniors who go into a nursing home for rehab, miss a notice, and come home and their bill is tripled.”
Law takes effect Oct. 1
Those practices cease Oct. 1 with a new law that bans variable-rate electricity contracts for residential customers.
Current plans will stay in effect until they end, but they cannot be renewed, and no new ones can be offered. Connecticut is the first state in the country to enact such a ban, which AARP Connecticut strongly advocated.
It is the second consumer-related electricity law Connecticut has adopted in the past two years with AARP’s input. Last year, AARP Connecticut successfully urged passage of a comprehensive residential electric customer bill of rights that went into effect on July 1. It requires that all electric bills show a customer’s current rate, the standard rate as comparison and the next month’s rate. In addition, the law eliminated cancellation fees on any variable-rate plan and limited fees to $50 on all contracts. Suppliers are required to give 30 to 60 days advanced notice before contracts expire.
“The state government has stepped in to say [these variable electric rates] are not fair and do not benefit all citizens, including seniors,” said Sen. Paul Doyle (D-Wethersfield), cochair of the General Assembly’s Energy and Technology Committee. “Some would say this is a radical move, but it’s not when you don’t have a choice whether to use or not use electricity. It’s a necessity. Every person needs electricity to live.”
The last piece of the puzzle will address what Zambo experienced: getting dumped with little or no warning into a variable-rate plan after a long-term fixed-rate plan expires. Connecticut’s Public Utilities Regulatory Authority (PURA) is scheduled to determine what is in the best interests of customers when their fixed-rate contracts expire. PURA is supposed to make recommendations to the General Assembly by January.
Erlingheuser encourages residents to tell PURA their stories and express their opinions. Attend an upcoming public hearing scheduled for October 20, 2015 at 6:00 p.m. in room 1D of the Legislative Office Building, 300 Capitol Avenue in Hartford, CT. For more information, contact Erlingheuser at 860-548-3165 or check PURA’s website, ct.gov/pura.