The Massachusetts Attorney General's Office presented on the risks of competitive electric supply and the benefits of municipal aggregation. The presentation detailed deceptive marketing practices and shared data on significant financial losses experienced by residents enrolled with third-party suppliers.
[SPEAKER_00]: Hi, everyone. My name is Sierra Mall. I am the Energy Consumer Liaison for the Massachusetts Attorney General's Office. I work in our Energy and Ratepayer Advocacy Division, and today I will be sharing a presentation on competitive electric supply, or as it is sometimes called, third-party electric supply. As a disclaimer, I am not an attorney, so this is not a legal presentation. and the Attorney General's Office as a whole cannot provide individual legal counsel or representation. This presentation is for informational purposes only and to be used as a resource.
Today, I will be going through the following agenda items. So first, I'll share a little bit about the Attorney General's Office, and then I'll provide some background and context around electric supply so that we're all on the same page, so that we can really get into competitive suppliers, who they are, what the main concerns with competitive suppliers are, and why competitive supply exists as an industry in the first place. Then I will share some tips for consumer protection and end on some things that the Attorney General's Office is doing around competitive supply.
At the Attorney General's Office, or AGO for short, we have four main buckets of work. We do consumer protection, and we combat fraud and corruption, we investigate and prosecute crime, We protect the environment, workers, and civil rights. And in all the work we do, the Attorney General's office is meant to be an advocate and resource for all residents of Massachusetts. On the screen, you have our Attorney General, Andrea Joy Campbell, who was sworn into office in January, 2023. At the AGO, we engage with every city and town across the state and our offices are statewide. We have an office in Boston, New Bedford, Springfield, and Worcester.
And I'm coming to you specifically from the Energy and Ratepayer Advocacy Division. We work within the Energy and Environment Bureau of the AGO. And our job at Energy and Rate Pair Advocacy Division, or ERA for short, is to ensure that Massachusetts residents and businesses have access to reliable, safe, and affordable energy. The attorneys and analysts on my team work hard to review utilities' petitions to increase their rates. And so we're in the weeds of things, trying to keep everyone's electric, gas, and water bills as low as possible. And we do this before the Department of Public Utilities at the state level, and then also regionally and federally.
We also are supporting an equitable and affordable clean energy transition as the state of Massachusetts works to meet its climate goals. The third thing is consumer protection from predatory energy suppliers and companies, which is what I am here to talk to you all about today. So I will start off with an introduction to electric supply so that we are all using the same words and you know where I'm coming from. When you look at your electric bill, you'll see two different sections. There will be the supply section, which is the cost of energy itself. So this is the electricity that you are using in a given month. That's your electric supply. And supply costs are based on market competition.
You will also have a delivery section, part of your electric bill, and that is the infrastructure and labor that brings energy to your home. It is services like metering, billing, and customer service. There's also utility revenue or profit, and then additional charges like state programs for energy efficiency and renewable energy. And these charges are regulated by the Department of Public Utilities. So your total bill costs are going to be your supply section plus your delivery section costs. Today, I will only be talking about the supply section of your bill when we are talking about competitive suppliers.
The reason for this is that in that supply section of your bill for your electric supply, you have three different options of suppliers that you can choose from. The first is basic service. This is from your electric utility. So if you're in Medford, this is going to be National Grid. When you have basic service, this just means that your utility is buying electric supply on behalf of its customers. So every six months, the rate for that electric supply through your utility will change based on market prices. And these costs are passed along to customers without profit. So whatever the utility pays at the market for electric supply is what you will pay for your own electricity use.
There's also municipal abrogation or community choice electricity, which is when a city or town buys electric supply on behalf of its residents. So it's similar, your city or town is also buying electricity in bulk just for a smaller customer base, only for people who live within the town. And usually we see that municipal aggregation programs have rates that change less frequently than six months for basic service. So typically two to three years, you can keep the same rate.
The third option is the main topic of our presentation today. It is competitive electric supply or third party electric supply. This supply option is when an alternative supplier buys electric supply on behalf of its customers. And its customers are anyone who signs a contract with that supplier. And rates can change based on contract type, whether you're on a fixed or a variable rate plan. I will talk about that later. And then contract length. So maybe you're on a three-month plan, a six-month plan, 12 months, 18 months, and so on. So there's not a set time that rates will change for everyone. It's just based on individual contracts.
So with those three electric supply options in mind, let's take a look at some price comparisons. For basic service, up here in the top left, those are the supply rates that change every six months. So for National Grid, this year we can see that from February 1st to July 31st, it is about 15.3 cents per kilowatt hour. And then it'll go up a little bit in August when rates change to be 15.48 cents per kilowatt hour. And a kilowatt hour is just how electricity is measured. It is a unit of measurement for electricity. And for your bills, you'll see a cents per kilowatt hour charge or rate for the electricity that you use. So if you use, for example, 500 units of electricity or 500 kilowatt hours of electricity in a month, Each unit will be 15.3 cents if you have this basic service plan from National Grid. And so your total electric supply will be the rate, 15.3 cents times 500 kilowatt hours, and that will be the supply total.
Looking at municipal aggregation, so Medford's program is called Medford Community Electricity Aggregation. They have a three-year lock-in for the rates that they have. So that's longer than basic service, six month changes. And then Medford's program also gives you three different plans that you can choose from. So there's the basic plan, which is a rate of 13.7 cents per kilowatt hour. And what basic means is that it's meeting Massachusetts renewable energy requirements. And that will be the same renewable energy that your utility is meeting.
You can go a step more in the direction of renewable energy through the local green, which is actually the default enrollment option for the City of Medford. And you will pay 14.1 cents per kilowatt hour, so still less than basic service. And you're getting a higher proportion of green energy content. For those who have the means, you can pay a higher rate of 16.6 cents per kilowatt hour for 100% green energy. So this is the only Medford option that is above basic service this year.
The third option for our electric supply is a third-party electric supplier. So I just picked one example. There are different third-party suppliers out there. This is a supplier option from Energy Switch MA, which is a website that shows the different comparisons of suppliers. And I picked this example because just looking at it, it appears that this supplier has a cheaper rate. It's 13 cents per kilowatt hour, and that is a slightly lower 13 cents than Medford's basic plan, if you look at the full decimal number.
But when we take a closer look, we see that this rate is only for six months. So a common practice for competitive suppliers is to offer a teaser introductory rate that is cheaper than what you will be paying after you are on the plan for a little bit of time. I can also see here, so when I was hovering over the information buttons, I see that there is a cancellation fee of $150. So if I wanted to cancel my plan, I would have to pay that cost and that could negate any savings you might get during those first six months. And there's also an automatic renewal. And so when I hover over that button on the Energy Switch MA website, it gives you this pop-up that says, upon the end of the initial term, your contract will automatically renew to a variable price product. So what started out as a fixed rate, which is staying the same for six months, it's always going to be that 13 cents number for the first six months. After that, it'll automatically renew to a variable rate. So it'll be a rate that changes from month to month.
So it's really important if you're thinking about enrolling with a competitive supplier, that you understand all of the charges that you will be paying for and what your contract might look like after an introductory rate. So now that we've done a little bit of an introduction to competitive supply, we know that we have three different electric supply options, and competitive suppliers are one of those, and we know that they are alternative suppliers that by electricity from the wholesale competitive market on behalf of the customers that have contracts with them. Now we're going to take a deeper look into competitive supply and some common issues that we see in the competitive supply industry.
So I've mentioned this a couple of times, but just so that you have the visual, competitive suppliers have fixed rates and variable rates. A fixed rate stays the same throughout your contract, whereas a variable rate typically changes from month to month. An important thing to note is that if you are enrolled with a competitive supplier for your electric supply, remember that supply is just one part of your bill. So it's just the electricity itself, and that means you still have to pay your utility to deliver that electricity to your home.
That's that delivery section of your bill that we talked about earlier. This is because utilities have all the infrastructure. So even though you're paying a third party supplier or your municipality for the rate of your electricity, it still has to go through all of the poles and the wires to get to your home. What this looks like on your bills is that you'll most likely receive a combined bill through your utility. So if you have National Grid in Medford, you'll get your National Grid bill. They will still be the ones sending you either a physical bill or a digital bill. And then your supplier will just be different on the bill. So what do I mean?
If you have a third party supplier, the supplier name will be listed under supply services. So this is what the supply services section of your bill looks like. The picture on the left is showing what my bill would look like if I had National Grid as my supplier. So if I was using basic service for my electric supply. The picture on the right is showing what my bill would look like if I had Medford's Municipal Aggregation Program as my supplier. So I can see my town name, is in the name of the supplier. So that indicates that it's a municipal aggregation program.
And if you don't have either of these supplier names on your bill, then you are enrolled with a third party supplier. And so if that is the case, take a look at the rate that is below. So for national grade, it's .14821 or 14.8 cents per kilowatt hour. If you have a third party supplier, look at that number and see how it compares to the basic service or Medford Community Choice Program rates that we had a couple slides ago. I believe for national grade it was about 15.3 or four cents and Medford had a few different options from 13 cents to 14 cents to 16 cents. So if you are looking at your bill right now and you see a rate that's higher than that, then you might want to look into your other electric supply options.
And so if you do have a third party supplier, Then you'll get that combined bill from National Grid. It'll say your supplier is the name of that supplier and you'll pay your bill like normal. And then your utility will then send the supply services charge over to your supplier. So you won't necessarily be paying the third party supplier directly through a separate bill. And as a reminder, we're just looking at the supply part of your bill. So there's another part of your bill that is the delivery. Those rates and charges are based on rates approved by the Department of Public Utilities, as well as the amount of electricity that you use in a month. Similar to how your supply is volumetric, where your supply rate is multiplied by the amount of electricity that you used per month.
But whatever the case, if you have a third party supplier, we're just focusing on the supply section. So you still have the additional charges that are coming in through the delivery section of your bill. Next, we're going to talk about some common issues that we see with competitive supply contracts and products. The first one is contract term length. So you might be enrolled in a 12 month contract or an 18 month contract where Either the price started off low, but then maybe you're on a variable rate plan. And so it increased steadily over time. And so you're locked into higher and higher prices throughout the length of your contract. Or maybe you're on a contract that's just longer than the basic service timeline. So maybe when you sign up, the rate is lower than basic service from national grid. but your contract is 18 months and National Grid changes their rates every six months, and maybe when it changes, it's lower, you're still tied into that higher contract length.
Variable rates, we've already talked a little bit about how these can be problematic if you don't know what you're going to pay for month to month, or if you're seeing large fluctuations in your rate from month to month, where you might be losing money over time based on the variable rates. Automatic renewals are another issue that we see where customers don't know that they're on an automatic renewal plan. Maybe it's in their contract, but maybe they were rushed through the signing process or they weren't notified ahead of time before the contract automatically renewed. And then there's even bigger issues when a plan will automatically renew from a fixed rate to a variable rate. automatically renewing to a plan that is different than the fixed rate you may be initially signed up for.
Cancellation fees, we saw in the example a few slides ago, how sometimes you have to pay a fee to cancel your plan with a third party supplier, and these can pose a financial burden. So The data shows that these issues separately and as well as stacked on top of each other often lead to higher costs over the term of the contract compared to what customers would have paid if they stayed with basic service from their utility or if they switched to municipal aggregation through their city or town.
In addition to there being issues with competitive supply products and contracts, there's also common issues with sales tactics. A really big one is that a competitive supplier, a sales representative will tell a customer that they're going to save money by switching to their electric supply. And this is because they often have low teaser rates that they're advertising, but they don't tell you that these rates are going to increase over time. And so there's some sales deception involved, which leads to customers losing money in the long run.
Another issue is when a sales representative from a third-party supplier pretends to be from a utility company to gain your trust or to look at your bill. This can lead to things like a salesperson asking to see your bill, to verify if you're on a certain program, or if you're eligible, or just to make sure things are looking right. And when they do this and they get your bill, they can see your account number and other personal information, and they can use this to switch you over to their services without your knowledge or consent.
Some suppliers use aggressive sales tactics like refusing to leave a person's home until they sign up for their service or by sending something in the mail that looks very scary. Maybe it says it's an urgent or a final notice for your bill. Maybe it says it's from a utility or it's from your city or town or a debt collector. And if you open this bill and you see that there's this notice, maybe you send some money or you share some personal information that they can then use to, again, switch you over to their services without your knowledge or consent.
Sometimes we see third-party suppliers in places that we trust. So outside the Walmart or the BJ's in your town, or maybe at a Red Sox game or at a festival. So this can be confusing if you are in a trusted community place. Other times suppliers will market their electric supply as green or renewable, but there's not really any transparency or credibility to what makes their electric supply green. Data also shows that certain communities are more impacted by the competitive supply industry. So some low-income communities, communities of color, communities that speak a primary language other than English, and other communities are more likely to be signed up with competitive suppliers and they're more likely to be paying a higher rate.
Now I'm going to show some data that shows how customers with competitive electric supply lose money in the long run. The Attorney General's Office has been publishing reports over the last 10 years or so that look into the competitive supply industry. And our most recent report shows how over the last nine years, residential customers who received their electricity from third-party suppliers paid $651.3 million more on their bills then they would have paid if they had stayed with their utility on a basic service rate.
The dark orange color on the far right is that total $651.3 million for everyone enrolled in third-party supply throughout the state. And then the smaller lighter orange bars are the yearly losses, the yearly net losses. And you can probably see that one year there was actually a small net gain. This is the period of time when the war in Ukraine started and some third party suppliers were able to keep their rates lower than basic service, which was affected by the increasing market rates for electricity.
I will just point out that the slight gain there was this year is only a fraction of the typical net losses we see every single year. And also not pictured in this graph, but elsewhere in the report is actually that low-income customers during this timeframe. So July, 2022 through June, 2023, they actually experienced a still a net loss. So a disproportionate impact for low-income customers enrolled with third-party suppliers. This next table zooms in to the individual household level. So the last table was showing losses for everyone in Massachusetts, the net total loss, whereas this is the loss on average for a single household. So the most recent year, July, 2023 through June, 2024, the average household enrolled with a third party supplier lost $185 during that year.
So that's money they would have saved if they had been enrolled with basic service through their utility. This figure shows the impact on low-income households enrolled with competitive supply, showing that they tend to lose more money than non-low-income households who are also enrolled with competitive suppliers. So the red color at the top, that is showing how from July 2023 through June 2024, low-income households enrolled with the third-party supplier lost an average of $244, whereas non-low-income customers enrolled with third-party suppliers lost $178.
Now I'm going to show you some Medford specific data. So we can see here in our most recent report, we have a snapshot from April, 2024. It's a lot of data to go through town by town. So it's just a one month snapshot. So bear that in mind, but the most recent data shows that in that month in Medford, there were 2,846 households enrolled in competitive supply. So this is about 12% of all Medford households who were enrolled with a third party supplier at the time of April 2024.
You can see here that there is actually a slight gain. It's fairly insignificant. It's a 38 cent saving for households, for all households in Medford through competitive supply. But actually, if we look at the next slide here, we can see that this is not the same story for low-income households in Medford. So low-income households are losing $4.63 per month, even though if you average it out across all households, there's a 38% gain from third-party supplier enrollment.
We can also see here that low-income households in Medford are enrolled at a higher rate. So there's 22% of low-income households at this time were enrolled with competitive suppliers, whereas in Medford for all houses only 12%. So there's a higher percentage of low-income households enrolled. I also want to point out that with this example, the most recent example of April, 2024, it's just one snapshot. Like I mentioned, I pulled another example from a report before the most recent one. This was from September, 2021. And we can see here that there are losses across all households. In this case, it was $24 and 75 cents was the average per household loss in a given month. So just some data to pour through if you're interested. It's on the Attorney General's Office website.
Some of you may be wondering why we have competitive supply in Massachusetts. So I decided to share some information on that. So before 1997, utilities were vertically integrated. This means that they generated, transmitted, and distributed electricity all in one, as one entity. So they had monopolistic control, which meant that they weren't really incentivized to improve their prices, their efficiency, or their services. There were some high rates. And so to address these rates, there was a policy reform in 1997 called the Massachusetts Electric Industry Restructuring Act. And this opened up market competition for electric supply. So utilities mainly became distribution companies.
This means that utilities were primarily just delivering energy as they do today to our homes, and they're buying their electric supply for the customers at the competitive market. Massachusetts is not the only state that doesn't have or that it has competitive supply. So there are 13 states that have a fully unregulated electric supply market. And when I say unregulated electric supply, I just mean that there is market competition for supply. And then 18 states have partial deregulation.
And so you might be wondering, now, what are some ways that I can protect myself as a consumer from predatory third-party supply practices? A big one is to just check your bills. You can make sure that you are not on a third-party supplier plan without your knowledge. So under the supply services section on your national grid bill, I think it's page two, you can verify who your supplier is. You can also see if you're on municipal aggregation and if you're with Medford, you can see which rate you're on and you can decide if you want to switch around to the different plans that Medford offers.
Next big thing is to protect your information. So you don't need to provide your electric bill or account numbers to sales representatives from third party suppliers. unless you are willing to enter into an agreement with them. And be cautious of sales tactics. So be aware that your utility will not send representatives to your door or call you on the phone to talk about electric supply rates. If a representative is contacting you about their electric supply rates, this person most likely works for a third party supplier, even if they are claiming to be from a utility.
The last thing is to know your rights. So you do not have to let a door-to-door salesperson into your home and you have the right to contact local law enforcement if the sales agent is refusing to leave your home or if you believe that they are posing a threat to the safety of you or others. Some other tangible ways you can protect your solve from predatory practices in the third-party supply industry are to put a supply block on your account. You can call up your utility and ask for your account to be blocked from getting switched over to another supplier without your authorization. The one caveat I will say to this is that if you are interested in switching to a municipal aggregation program from basic service or if you're on a third-party supplier, I would switch first to the plan that you want to be on and then call your utility to put a block on your account because if you have a block on your account, you can't switch to municipal aggregation because they take your account number and they use that information to switch you. So you can switch and then put the block on and then you'll be staying on that plan unless you consent to otherwise.
You can also opt out of customer information sharing lists on the National Grid website. If you look up opt out of supplier list, you can remove your contact information from marketing lists that are used by third party suppliers. And beware of impersonators. So I've said this once and I'll say it again, your utility will not go door to door and try to sell you an electric supply product or ask to see your bill or account number.
If you're getting a phone call from someone and they're saying they're with your utility, verify the phone number. Your utility bills have a customer service number and contact information on them. And if something is not matching up, then you may be speaking to an impersonator. And never pay over the phone unless you initiated that call and you used that customer service number that's on your bill or on the National Grid official website. Don't open suspicious links, attachments, or mail. And protect your utility account number as if it was your credit card, social security number, any important document or information that you wouldn't want shared because this is one of the pieces of information that a supplier can use to switch you over to their services without your knowledge or consent.
If you do decide to switch to a competitive supplier, Be sure to compare prices and be aware that you are signing a contract. Before signing the contract, here are some questions that you should ask. How long is the contract? What is the price per kilowatt hour? Is that rate fixed or is it a variable rate? And if it is variable, how does it change? Is there a cancellation fee or an early termination fee? Are there any additional fees?
Is the rate that's being offered an introductory price, so will it change over time? Does the contract automatically renew? And if so, will you be charged the same rate or a different rate? Will you save money over the course of the contract? And does the contract provide renewable power? If it does, what is the source? And is it a qualified renewable energy credit? Be vigilant if you do sign up and make sure that you are getting the rate you contracted for. And know the importance of comparing prices for both the initial teaser rates and potentially higher future rates among suppliers.
If you do decide to sign up but then you change your mind, you should know that you have three days to cancel without charge. I will wrap it up with sharing what the Attorney General's Office can do around competitive suppliers. We receive complaints, so we have a consumer response division that can receive complaints about third-party suppliers. We can investigate competitive suppliers for unfair or deceptive practices. So far, we've investigated three different suppliers, resulting in $9.1 million in restitution.
We have a website and a fact sheet on our website with frequently asked questions And this fact sheet is available in 8 different languages. Since 2018, we've published annual reports on the competitive supply market. Our 2026 update is coming out soon, so stay tuned. We also make policy recommendations and advocacy. And we continue to advocate for legislative changes to the competitive electric supply industry that will protect consumers. I mentioned we take complaints. These can either be through our online system, so there's an online complaint form, or you can call our consumer hotline, and this information is on the next page.
Our utilities team of the Consumer Advocacy and Response Division at the AGO will resolve the complaints in-house, or you may be directed to one of our local consumer partners who can help mediate your complaint as well. If a supplier has multiple complaints against them, these will be noted and escalated as appropriate. So complaints help us track patterns and trends and see which suppliers have multiple complaints against them. This may look like our consumer team calling a competitive supplier directly or notifying the division that I work in, the Energy and Rate Pair Advocacy Division, so we can decide if an investigation is appropriate.
Here on the bottom, the last bullet there, that is the consumer hotline and the link to file a complaint with the Attorney General's office. But if you are on a third-party supplier and you have questions about your contract or you want to cancel, your first step should be calling your supplier directly. You should be able to cancel over the phone. And be sure to ask if there are any cancellation fees. If the issue can't be resolved or you have concerns or complaints with a competitive supplier, you can contact the Department of Public Utilities. They have a consumer team that takes complaints, as well as the Attorney General's office. Here are some resources if you want to learn more, and thank you all for listening today.