The Codcast: Two firms say Healey goes too far

Claim electricity sales market needs more competition, not less

ATTORNEY GENERAL MAURA HEALEY wants to shut down the companies that sell electricity to residential customers in Massachusetts, but officials with two of the firms say the answer to any problems with their industry isn’t less competition but more.

Chris Kallaher, senior director for government and regulatory affairs at Direct Energy, and Ed Brolin, director and assistant general manager of Just Energy, said on this week’s Codcast that the attorney general is over-reacting.

Healey said a study conducted for her office indicated that roughly 50 firms sell electricity to about 20 percent of the state’s residential electricity customers. She said the firms engage in deceptive sales practices, target low income and elderly customers, and over a two-year period charged $177 million more for electricity than the basic service offered by the state’s utilities.

Instead of calling for reforms or more consumer education, Healey said she wanted to shut down the companies. The unusual solution is getting serious attention. Gov. Charlie Baker said he wanted more time to study Healey’s proposal and the Legislature indicated it plans to hold hearings to determine the correct course of action.

Kallaher said retreating from the type of competition ushered in by electricity deregulation 20 years ago would be a mistake. He said Healey’s study was flawed and basic service – where utilities buy electricity for customers who don’t choose a competitive supplier – was not a good point of comparison.

“If the utility had to operate basic service as a free-standing business, just taking in revenue from the rates they charge basic service customers, they would go out of business, probably in a couple of months,” Kallaher said.

Both Kallaher and Brolin said it would make more sense to shut down basic service, which they said would encourage more competition and prompt customers to shop for electricity the same way they shop for internet, cable, and phone service. “Consumers are not being encouraged to shop enough,” said Kallaher.

Brolin said the point of competition isn’t always to lower prices. “It’s not just about price,” he said. “It’s about choice.”

He noted the companies selling electricity offer many types of products. Some are focused on price, while others offer electricity from all-renewable sources or provide points to loyal customers that can be redeemed for gift cards or energy-saving products.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

All of the current offers from Direct Energy and Just Energy listed on a state website have prices that are currently lower than the basic service cost. But the contracts offered by the companies last anywhere from 12 to 36 months, while the basic service price changes every six months, and typically goes down in the summer months.

The day before her press conference Healey announced a $5 million settlement with Viridian Energy, which was accused of engaging in deceptive sales practices. In December 2014, the attorney general’s office reached a similar  $4 million settlement with Just Energy.

“The settlement that Just Energy entered into with the attorney general’s office in Massachusetts is a really good example of how surgical activity as opposed to draconian and heavy handed and doing away entirely with a competitive marketplace effectively works,” Brolin said. “We entered into assurance of discontinuance of various practices with the attorney general and since then have had zero issues. For the last number of years, we have had a monitor regularly looking at our activity in the Commonwealth and we have had zero complaints along those lines.”