Five energy companies take on ComEd to power Chicago area
BY MIKE NOLAN Sun-Times Mediamnolan@southtownstar.com March 7, 2011 5:06PM
Updated: September 24, 2012 6:25AM
Are you ready to buy electricity the way you buy toilet paper or breakfast cereal?
You’ve probably heard radio commercials or received something in the mail from a company other than ComEd, urging you to switch power suppliers.
Currently, five companies are actively marketing in the Chicago market, with the most recent being Constellation NewEnergy, whose direct-mail onslaught began hitting mailboxes last week. Other companies that have come courting are BlueStar Energy Solutions, Champion Energy, Direct Energy Services and Spark Energy. And more could be on the way.
So far, homeowners haven’t rushed to switch suppliers. Through the end of September, the most recent figure available, just 807 of ComEd’s roughly 3.4 million residential customers had opted to go with an alternative supplier, according to the ICC.
It’s the second wave of energy deregulation that began a few years ago, when companies selling natural gas began knocking on homeowners’ doors, promising savings by locking in long-term rates.
The results of deregulating natural gas markets have been less than stellar, according to David Kolata, executive director of the Citizens Utility Board, a utility watchdog group.
“Natural gas competition really is not working all that well for consumers,” he said. “The vast majority of the offers have been money losers for consumers.”
Alleged high-pressure sales tactics by one firm brought a lawsuit from the Illinois attorney general’s office and changes in state law to provide more safeguards for consumers and more power for the Illinois Commerce Commission to punish suppliers that use misleading sales pitches.
So far, the companies selling electricity in Illinois are getting high marks from the Better Business Bureau, but whether consumers will save under their plans is up in the air.
The companies’ current offers provide a better price than ComEd but require customers to sign a 12-month contract.
“Their offers are below ComEd’s price, but that doesn’t mean they will be below ComEd’s price forever,” Kolata said.
ComEd’s current rate is about 8.3 cents per kilowatt hour, while Constellation is offering a rate of 7.7 cents and Champion 6.4 cents, according to CUB, which has comparisons of the various companies’ offers on its Web site. But ComEd customers could see a “decent-size cut in ComEd rates” come June, perhaps from 3 to 5 percent, Kolata said.
Part of the reason electricity prices could fall is that high prices ComEd paid a few years ago as a result of disastrous reverse-power auctions are phasing out, he said.
“People shouldn’t presume that just because an offer right now is below (what the utility charges) it will always be lower,” Kolata said.
Some of the companies also penalize customers for breaking a contract if, after a few months, they have second thoughts.
BlueStar and Champion will charge customers $10 for every month still left on their contract, while Constellation’s exit fee is $150, according to CUB. Constellation’s customers, however, can opt out up to 90 days after signing a contract and not be penalized.
Breaking loyalty to ComEd
For years, companies such as Texas-based Constellation have been selling gas and electricity to factories and other businesses in Illinois, but selling to residential customers is a whole other animal, according to David Fein, Constellation’s vice president of energy policy.
“Business owners are used to people competing for their business, whether it’s supplying them with paper, phone service or natural gas,” he said.
But homeowners who’ve grown up knowing only ComEd as their power supplier might not be too quick to switch. Fein said he’s come across potential customers who think ComEd will be mad at them if they change or ignore them if they call the utility with service issues.
“There’s a heavy emphasis on customer education,” Fein said of Constellation’s marketing effort, which starts with 2.2 million direct-mail pieces and will later incorporate billboards.
ComEd doesn’t make a profit selling you electricity — it passes along the cost it pays for power — but bills for delivering electricity to your home. Thanks to a recent Illinois Commerce Commission decision, alternative suppliers are able to piggyback onto ComEd bills instead of having to send out separate bills.
More competitors for ComEd customers could enter the fray. Alternative suppliers including Commerce Energy and FirstEnergy Solutions have gotten clearance to sell to homeowners but haven’t yet entered the market.