(That’s my Bostonian version of “super,” in honor of Mitt Romney, who I predict will win tonight. I know, I’m really going out on a limb here.)
Yeah, so today could be a defining moment in our country’s future. Since I live in Illinois and have no horse in this race, I’ll be here eating my popcorn and watching this freak show from the sidelines. For those of you in OH, GA, AK, et al, I hope you all do right by us non-primarians (yes, I made that up) and choose wisely. For the love of my toddler and baby, please choose wisely, people!! Gah!
DEREGULATION IS DEMOCRATICSo, clearly choice is an extremely important element in our lives. The democratic process is a gift. And, when it comes to the ability to flip on your lights and not in turn be required to hack off your arm and leg to pay the bill collector, democracy is particularly key. Here in Illinois, in Texas, and a dozen other states, we are blessed with a democratic process when it comes to our electricity supply; we have CHOICE. We can have someone else supply our electricity as opposed to our local utility. Again, for you newbies, here’s my very quick breakdown of deregulation: So, there’s the power plant where they make electricity. (It’s more complicated than that, so go here if you want the whole enchilada version.) Then that electricity is transmitted by a supplier to your local utility, who delivers (or distributes) it over their wires and poles to your home. Pre-deregulation, the utility used to transmit AND deliver the electricity. Post-deregulation, other suppliers can compete to transmit the electricity to your local utility, who continues to deliver it to your house (since they own the wires and poles). Make sense? So, in reality, you should consider yourself very lucky — we’re kind of spoiled over here in D-reg land. Not all states have the benefit of choice. They face totalitarian rule on the electric supply front; they are stuck with their default utility, with no other options. The horror, the horror. And you know what the very worst part of this equation is… ?? INACTION. There is a serious lack of action going on here in Illinois, where only a meager 9% of residents have taken advantage of deregulation and its inherent opportunity to save money via switching to another supplier of electricity. That amounts to about 315k who have switched, out of 3.4M total residential customers. Why the heck? And here I thought Illinois was pretty progressive. What is this about? Or not about? (Texas, we aspire to your deregulated greatness. We’ll get there someday! Queue the Rocky theme song, please.)
The Politics of FearActually, there’s no need to explain to me. I get it. A lot of you are afraid to switch. That is clear — abundantly! And we all know that the basis of fear is the unknown. Or in this case, the misrepresented. Despite the scary things you’ve heard about deregulation, those of us in the know understand that it is indeed a benefit, and when handled properly, can effect positive changes both in our pocketbook (as my grandma calls it) and throughout the industry as a whole – and hence on our daily lives.
Where does this fear evolve from exactly? Many people displace their fear about gas deregulation onto the electricity industry. That’s what my therapist would say, at least. So repeat after me… Electricity. Is. Not. Gas. We fully recognize that mistakes were made and money was lost in gas deregulation. But that was gas — an entirely different animal. It’s like saying that if the price of Iowa corn skyrockets because, say, the workers go on strike, the price of Northern Michigan cherries (that’s a very obscure shout-out to my hometown, Traverse City. Love ya!) will escalate as well. They are both crops, after all! Non. Just a little bit of logic is missing there, hmm?
Electricity and gas come from completely different sources and are transported through entirely different means. On top of that, gas sort of served as the lab mouse of deregulation. The poor little mouse got lost in the deregulation maze and expired when he hit some dead end. Clearly Pavlov didn’t ring his bell. And he lost his tail in the process, too. (Not sure how, but that’s beside the point. It’s a metaphor, geez.) The electricity industry actually learned a lot from that furry — albeit a little matted — little guy. Electricity is taking an entirely different route as a result of gas D-reg, because, ah, no one wants to end up dead in a corner somewhere with no tail. It’s just not a good business plan. Yeah… no. See, when you just think it through, you’ll start to understand that there are entirely different players and regulations in place for electricity than gas. And you can still have your cherry pie even if the corn doesn’t get its ears.
“Trust, But Verify” – Ronald Reagan
Ok, so what else… maybe you don’t trust these new electricity suppliers. Who are they exactly? Why are they able to offer lower cost electricity? What if they close down one day out of the blue and suddenly I lose power? Won’t ComEd be pissed they are losing all these customers? Whoa, let’s back up. First of all, some random company can’t just wake up one morning and say, “hey, I think I want to be an electricity supplier today!” and then show up on your doorstep to switch you over. It doesn’t work that way. There is a TON involved with being a supplier. In Illinois for example, in addition to knowing the electricity industry backwards and forwards, they have to earn certification through the Illinois Commerce Commission to become a supplier. The ICC is a government-run organization. You know what this means. Nothing happens quickly. Or easily. Turtle-esque, is more like it. (No offense turtles, I love you – you’re just slow!) Suppliers also have to be insured and bonded. And THEN — and this is probably the largest undertaking – suppliers have to make friends with ComEd so they can include their supply services on ComEd’s bill to you. Definitely NOT a simple process, is it? (Want to see? There’s an entire booklet dedicated to it.)
So, what I’m trying to get at is that suppliers have done a lot of work and have earned their static cling. They are indeed worthy of your esteemed business – and you are worthy of the savings they bring. And, on that note… the reason they can offer electricity at a lower cost is because utilities often only buy electricity for their customer base every few months, or sometimes even years. For example, when ComEd last bought a large portion of their supply a few years ago, the electricity prices were particularly high. Bummer for them, right? (And for you, if you haven’t switched, since those costs are passed along to customers.) On the other hand, suppliers can buy every day — or not — so they can purchase at the very best rates. In addition, they have to estimate how much electricity to buy for their customers to use each day. Since everyone’s usage varies every day, it is indeed an estimate. Now imagine ComEd, trying purchase electricity for a whopping 3.4M customers, estimating their collective usage years in advance. I’m guessing their calculations are going to be a bit off. (Just a tad!) Hence, if they bought too much, they lose the money on the electricity purchase, and if they didn’t buy enough, they have to buy it on the fly at elevated rates. (Think of it like springing for a plane ticket the day you have to fly, versus weeks or months in advance.) You can start to see why their rates are not always particularly favorable, right?
Ok, so you’re probably wondering… what if the supplier suddenly lost their way in the maze and ended up dead in the corner? Your account would simply revert back to ComEd. It would not cost you a thing. And your lights would not so much as flicker. Your power not be affected one bit. That’s because ComEd owns all the wires and poles, remember? So, what else is there to worry about? Oh right, you think ComEd will be pissed if you go with an alternative supplier. Wrong again! ComEd doesn’t lose a thing in this transaction. First of all, ComEd doesn’t care who you get your supply from, because ComEd does not make money off of the supply of electricity. All of their money is in distribution. Further, when ComEd supplies the electricity, as they have done in the past, they are just passing their costs for purchasing that supply along to the customers. It makes sense, doesn’t it? Why else wouldn’t they be more strategic about the purchase of their electricity supply? Lastly, have you tried to call ComEd at any point as a customer? Perhaps you had a question about your bill, or a long overdue meter read. Have you noticed that they are not exactly killing themselves to help you out – if you can even get them on the phone? In their defense, they kind of have their hands full with 3.8M residential and business customers and the power arbitrarily going out from weather, tennis shoes on the line, Type A chipmunks, etc. That said, they don’t really have to provide great service. You are their captive audience — they have a monopoly on the delivery of your electricity. That is simply out of your control.
Be A Good Citizen, Damn It
Despite all that, you know what’s really great? We live in an electrically democratic state. You can choose who supplies your electricity. You have a choice apart from ComEd or Ameren in Illinois! Yep, it’s a fact. Now get your lucky little self over there and exercise it! Go ahead, type your zip code in that little box up there on the right and see how much you can save. If you don’t need the extra cash in your pocket, well… switch in support of democracy!
And, if you do, I might even share my popcorn.