- [Narrator] The average U.S. household
consumes about 11,000 kilowatt hours of electricity a year.
The biggest share of that power
about 16% goes to this, air conditioning.
Summer months, spring higher temperatures
and higher electricity bills.
But a Wall Street Journal analysis
found you could be paying more than your neighbors
to keep your house cool.
And may not even know it, even if the power is generated
in the same exact place and transmitted
on the same exact power lines.
(power lines humming)
To understand how this happens,
first, you need to understand how power gets to your house.
Power plants generate electricity.
The voltage is cranked up at a substation
and sent across long distance transmission lines.
Crank down again, then sent through distribution lines
that connect to your home.
In many cases, everything from the plant to the power poles
are owned by a regulated utility company.
They supply you with the power
and bill you for how much you use.
Government officials let the utilities charge enough
to cover costs and make a modest profit.
But high electricity prices cost regulators
to re-examine this model.
- The big question that drove a lot of thinking
in the 1980s around electricity and deregulation
or restructuring, was did the whole system
have to be a monopoly?
Or could there be pieces of the electricity ecosystem,
parts of how electricity is generated, moved over wires,
and then supply it ultimately to customers
that could be competitive businesses and kind of broken off.
- [Narrator] Deregulation was in vogue from railroads
to telecommunications
and the energy market was no exception.
It opened up to allow for companies to compete to sell power
to homes and businesses.
These new entities known as retail energy companies
would buy electricity from generators
and sell it to consumers
usually over the local utilities wires.
The argument for deregulation went that giving consumers
a choice between their old utilities
and new arrivals would create competitive pricing
and lower their bills.
Eventually at least 18 States deregulated
retail residential electricity to varying degrees,
but in many of them,
the promised savings haven't materialized.
According to a Wall Street Journal analysis
between 2010 and 2019, U.S. consumers who signed up
with retail energy companies paid $19.2 billion more
than they would have if they'd stuck
with their incumbent utilities.
Retail customers have paid the most in Texas
which deregulated this energy market the furthest.
This system came under intense scrutiny
after a February, 2021 winter storm crippled its power grid
and left many Texas residents with electric bills
that soared into the thousands of dollars.
Electricity deregulation has worked for business.
Federal data show it led to substantial savings
for commercial and industrial power customers
whose large scale electricity use
give them the incentive to shop around
and seek expert guidance.
The retail power industry largely languished
until about a decade ago.
When many states adopted a regulation
called purchase of receivables
that made the traditional utility companies
solely responsible for unpaid bills.
Experts have said that because they were no longer
responsible for unpaid bills
retail power companies, didn't have to worry about the risk
of signing up lower income consumers.
- There are often many, many variations
in the kind of electricity contract that you might sign
with a retail provider.
Just as for cell phone contracts
you might be negotiating about data and minutes
and other bells and whistles that might come with a contract
that might increase its attractiveness.
A second really important similarity
has to do with the sort of central role
that getting customers plays in the business model
of retail electricity providers
- [Narrator] Experts say retail energy salespeople
often go door to door and offer perks
for switching to their service such as gift cards
or free light bulbs.
Many states have investigated retail providers
marketing tactics that target elderly and poor customers,
as well as heavily minority neighborhoods
where electricity bills account for larger shares of income.
A 2018 Illinois lawsuits said "An energy retailer
"carried out a particularly egregious marketing scheme
"that disproportionately impacted African-American consumers
"on the South and West side of Chicago."
And an analysis of the Connecticut retail power industry
revealed that retail power customers
receiving state assistance to cover electricity costs
known as hardship customers paid premiums
that were on average nearly 50% higher than other customers
for retail providers.
Susan Baldwin an independent consultant for public utilities
and consumer advocates says some retail companies
have questionable marketing tactics
with aggressive sales pitches aimed at enrolling customers.
- It shows disproportionate harm
to those who can least afford to pay
for an essential service, this is not a luxury item.
This is electricity.
- [Narrator] Part of the problem is that
many consumers don't know who is selling them their power.
In most states that allow competitive electricity markets
for residential customers, bills are provided
by the incumbent utility company
even if the power is delivered by a retail supplier.
The identity of the retailer is disclosed
somewhere on the bill, but it isn't always obvious.
Here's one way to check if you're paying more for power.
Look for the part of the bill,
that details price comparison information.
There you should find the price
for the so-called standard offer service
or SOS for one kilowatt hour of electricity.
That is the average rate charged by the incumbent utility.
Next, look for how much your electric supplier charged
for that billing period
which is often reported alongside the name of the company.
Take the rate your electric supplier charged
and multiply it by the number of kilowatt hours used
to get the amount paid to the retail supplier.
To figure out the difference between what you paid
to the supplier and what you would've paid to your utility,
multiply the SOS rate by the kilowatt hours used
and subtract that amount
from the amount paid to the supplier.
The retail, companies can see
that there has been some bad behavior in the market
and that the industry needs to improve its reputation.
An industry backers say residential customers
need better education from the industry and regulators
on how the retail electricity market works
and how it can benefit them.
Consumers can take advantage of the deregulated marketplace
by strategically shifting
to suppliers with the lowest prices.
But that can require reading their contracts fine print.
Consumer advocates also encourage customers
to scrutinize their bill and report
any potential wrongdoing.
And consumers can always switch back
to their incumbent utility provider.
- If you look at your bill,
and it seems to be through the roof,
and it's not what you were led to believe
you were told one thing about rates being wonderfully low
and they ended up being terribly high,
call your public utility commission and complain.
- [Narrator] Retail power
was supposed to be a light bulb moment
for the energy industry,
but the cost of keeping that light bulb on
appear to be higher than they could be.
(fading low music)