Few Central Hudson customers take advantage of deregulation

A group of competitive energy suppliers is proposing that Central Hudson Gas & Electric Corp. spend up to $800,000 to promote their business with a postcard campaign, bill stuffers and a public relations drive.

It’s your money, as a customer of Central Hudson, that they’re talking about.

They call it a “consumer outreach campaign” to Central Hudson customers to “assist in the education of consumers on how energy choice works and how they can go about selecting an alternative energy supplier, if they so choose.”

The money is in Central Hudson’s coffers and was provided by customers between 2006 and 2008, according to Central Hudson spokesman John Maserjian.

The proceeding at hand is a decision-making process by the Retail Access Collaborative, a group empowered by the state Public Service Commission to come up with ways to spend the funds.

Most of the members are “energy service companies,” or ESCOs, that market the supply of gas and electricity and which may be chosen as alternatives to Central Hudson on the supply side, though Central Hudson still provides the delivery.

Relatively few Central Hudson customers have migrated to the ESCOs. A report from January showed 15,343 electric customer accounts, or 5.1 percent of eligible ones, had shifted.

Of 49 large nonresidential accounts, 25 had shifted, or 51 percent, showing heavy participation among the biggest, mostly industrial, users. But among home accounts, only 4.4 percent had moved. The vast majority have stayed with Central Hudson as a supplier.

The numbers are about double those of a year earlier.

Recently, Steven Lant, who is chairman, president and CEO of Central Hudson’s parent, CH Energy Group, made public comments about “the unmet promises of deregulation,” the Public Service Commission’s program that led to the customer choice initiative, the sell-off by utilities of their generating plants and the creation of a marketplace for wholesale power sales.

Lant said that despite “a decade of promotion,” few consumers choose alternative power suppliers.

One party in the Retail Access Collaborative is urging that the money be reprogrammed away from the whole area of marketing about customer choice.

“There is no objective evidence that switching to an ESCO is to the residential customer’s long-term advantage or that is cost-effective from either a customer or total societal perspective,” said Gerald Norlander, executive director of the Public Utility Law Project, or PULP. He called the plan “more ESCO marketing malarkey, relabeled deceptively as ‘utility customer education and outreach.’ “

“Any real educational materials should address the many problems faced by consumers who switch to ESCOs,” he added.

He said Central Hudson has calculated the postcards would cost about $660,000.

“The best thing to do is give it back to the customers and let the customers spend the money,” Norlander said. Or, “expand their low-income program to help people having trouble.”

That would be a radical change from the nominal purposes of the fund. Maserjian said, “The funds were originally earmarked by the commission for the ‘promotion’ of retail marketing and the Customer Choice program. As a result of a subsequent commission order, they may now only be used for outreach and education, not promotion.”

Efforts to reach the marketers who made the proposal brought no results this week.

But James Denn, a spokesman for the Public Service Commission, defended the retail access program.

“Large companies clearly see the value of choice, and that helps keep their costs down, which helps the local economy. More important is the fact the load percentage has shifted, up to 87 percent in some categories. That is an important issue in terms of ensuring long-term energy deliverability. Finally, Central Hudson’s experience is not universal; all other utilities have seen higher migration rates.”

But it’s still a hard sell here, apparently. Michael Lanari of Beacon has been trying the alternative systems for his home’s natural gas supply and got whacked by a change in the markets.

“I got all excited earlier this year when fixed-rate contracts dropped into the 90-cent-a-ccf (hundred cubic feet) range and locked into a contract based on that,” Lanari said. “Little did I know that rates were about to decrease into territory not seen in five years. I wound up paying to get out of the contract, which in the long run will still be a savings based on my usage. So even the savviest of ESCO shoppers can find existing in the ESCO world a real challenge. I am back with Central Hudson as gas provider for the first time in four years and will continue to evaluate my options going forward.”

Lanari disagreed with the ESCO proposal. He said Central Hudson should be using the money “to reduce rates for consumers who have had to deal with higher than normal gas rates in the last few years.” He added that there’s a lack of standardization to let customers compare ESCOs. He said ESCOs should offer more competitive deals “without being subsidized from Central Hudson.”

One useful fact for customers would be a report on which ESCOS retain customers and which ones lose them, PULP’s Norlander said. That information is sent by all utilities to the commission, but it is not made public.

“We just wonder, are some companies better than others in terms of customer satisfaction?” Norlander said.

A check of commission records shows that the utilities ask for the data to be exempt from public disclosure as a trade secret and the commission grants that.

Maserjian, of Central Hudson, said disclosure would harm companies and the markets.

“As in any business or industry, certain information, if obtained by a competitor, could provide an unfair advantage,” he said. “By keeping this information confidential, the playing field is kept level and the competitive markets are able to function properly. This is in our customers’ best interest, as a compromised market cannot always provide competitive services and prices.”

Norlander said another issue with retail access is that it’s subsidized by a state break on sales taxes on delivery services. This break is one that only the ESCOs can get, and it lowers their costs compared with those of a utility such as Central Hudson.

That ESCO break costs the state $150 million a year now in “revenue foregone,” he said, citing data from the state Department of Taxation and Finance.

“If this is a marketplace, why are we subsidizing it?” Norlander asked.

By Craig Wolf at cwolf@poughkeepsiejournal.com or 845-437-4815.

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