10 Things Your Utility Company Won't Tell You

Want to get really heated? Read on.

1. "High prices? You ain't seen nothing yet."
California's experiment in deregulation has been a huge failure, with the promised 20% cut in consumers' energy bills replaced by rolling blackouts and spiking prices. The Federal Reserve Bank of San Francisco estimates that the average California household will spend an extra $750 on energy this year.

"Deregulation is all about what's good for big business," says Christine Patronik-Holder, spokeswoman for the Safe Energy Communication Council, a policy organization based in Washington, D.C. "It's never been about what's good for residential consumers." Indeed, the 23 other deregulated states are experiencing problems of their own. In Georgia, for instance, more than 27,000 complaints (mostly billing-related) were filed in the first 20 months of gas deregulation. Keep complaining, urges Maine-based consumer-affairs consultant Barbara Alexander. "Only the state's public service commission can spot a lot of complaints," says Alexander, "and they need information from customers to do that."

2. "We have no idea what you really owe."
So you spent last month turning out lights and fussing with the thermostat — and your utility bill still broke $300. The culprit may be an "estimated bill," which utilities in many states are allowed to send out every other month. It's clear why utilities favor estimates. "If they can read fewer meters, they save money," says Martin Cohen of Chicago's Citizens Utility Board.

But such shortcuts are highly error-prone: Last August, San Diego consumer group Utility Consumers' Action Network studied estimated bills issued by San Diego Gas & Electric, and found a 170% increase in errors in the past four years. SDG&E spokesman Ed Van Herik says the company has used more estimates due to a shortage of meter readers and the fact that "we no longer go into yards with rottweilers."

The solution: Read the meter yourself. And if you receive an inflated estimated bill, call the company and ask for an accurate meter reading.

3. "You're bankrolling our risky ventures."
If you live in a deregulated state, your utility might not charge you just for energy. Customers often help utilities pay for "stranded costs," or projected losses incurred after deregulation. In California consumers have paid about $20 billion to cover stranded costs and are expected to pay another $20 billion.

Meanwhile, the utilities are rolling the dice on side projects. In Ohio consumers are paying $7 billion in costs to FirstEnergy (FE), which is spending $4.5 billion of that on a merger with New Jersey utility GPU (GPU). (FirstEnergy spokeswoman Ellen Raines says the costs were approved by Ohio's Public Utilities Commission.)

4. "Surprise! You've switched companies."
Gas and electric utilities have taken a cue from phone companies, switching consumers' providers without consent. Often, you won't know you've been "slammed" until a strange (and sometimes higher) bill arrives in the mail.

Fort Lauderdale, Fla.-based utility Total Gas & Electric, for instance, agreed to pay $200,000 in penalties for switching gas companies on thousands of unsuspecting New York customers. State Attorney General Eliot Spitzer says the company charged more than the promised rate and failed to tell consumers they could cancel. A recent company statement maintains that TG&E did nothing wrong and "conducts its business at the highest ethical level."

5. "Your contract is meant to confuse you."
In deregulated markets, where each company plays by its own rules, a utility contract "can start to look like a cell-phone contract," says Consumers Union senior policy analyst Janee Briesemeister.

Consider an Illinois program where consumers can choose their gas supplier. "There's no way to make an informed choice because of the way pricing is structured," says Cohen. "(It's) based on a 'market index price,' which by definition can't be determined in advance."

What you can do is compare pricing policies. Some companies charge a flat rate per unit no matter how much energy you use, while others may increase the unit rate with usage (a nightmare if you run the air conditioner when only the cat is home).

6. "We'll disconnect you in a heartbeat."
Skyrocketing prices have left many consumers struggling to pay energy bills. Often the utility company's response is to turn off the juice, refusing to negotiate a payment plan or failing to recognize consumers' rights. "They see disconnection as the ultimate collections tool," says Briesemeister.

In most states, customers have a right to written notice of the termination, a hearing if the charge is disputed and protection from disconnection if there is serious illness in the household. But that doesn't always happen. SDG&E issued a final notice to Santee, Calif., retirees Hugh and Rose Relaford despite the fact that both of them have been hospitalized repeatedly in the past year for pneumonia, diabetes and other ailments. "I'm on the phone for two hours a day trying to get someone to help," says the Relafords' daughter, Brenda Hunt. "But I get zilch." Van Herik insists that SDG&E "goes to great lengths to reach agreements with customers."

7. "We're manipulating the market."
Are utility companies intentionally withholding supplies to drive up your bills? Some consumer groups think so. Mark Cooper, director of research at the Consumer Federation of America, cites a study that broke down the California energy supply on an hour-by-hour basis. In 98% of the hours, the study found, suppliers either charged a price wildly above their cost, or withheld supply.

Natural-gas utilities lay the blame on pipeline operators, such as Texas-based El Paso Corp. (EPG), whose pipeline supplies gas to California. "El Paso leased space on its pipeline to its (own) affiliate," says PG&E spokeswoman Staci Homrig. "There are many who think this relationship contributed to (higher) prices." (El Paso denies all charges.)

8. "We've abandoned environmentalism."
Due to the recent power crisis, environmentalism has taken a backseat to other concerns. In California last year, plants that were shut down for reaching pollution limits were reopened to help ease the energy crisis.

Perhaps the worst offenders are coal-fired plants, which produce 51% of the nation's electricity and are a big source of smog-inducing nitrogen oxide. Many of them profited from a grandfather clause, exempting them from clean-air requirements adopted in the 1970s. (To see how your area rates, visit www.epa.gov, which lists emissions data for plants in each state.)

9. "Our old equipment is leaving you in the dark."
It's one thing for near-broke utilities to cut costs — but missed repairs within their infrastructures can mean power outages. Following prolonged outages in New Jersey during a 1999 heat wave, the state's utility board probed electric company GPU and found that it had delayed replacing failed transformers for two years. "We recognize that we fell short of expectations," says GPU spokesman Ned Raynolds, adding that the company is now spending $56 million on improvements.

According to Alexander, the likely reason repairs aren't being done is that utilities are saving their money to invest in more-profitable ventures, such as buying plants in other markets, then selling the power at deregulated prices.

10. "Federal regulators are in our corner."
How many utility regulators does it take to screw in a lightbulb? More than you can afford. The Federal Energy Regulatory Commission is supposed to regulate the wholesale electricity market, but consumer advocates and industry groups argue the commission isn't doing its job. A recent report by the California Independent System Operator, the nonprofit corporation that controls the state's power grid, found that electricity wholesalers overcharged California utilities by $6.3 billion. But FERC has so far ordered only $125 million (and collected $8 million) in refunds.

"FERC is thoroughly responsible (for California's problems)," says Cooper. "They defined the whole state as one market, when everybody knew that it should be divided into several markets (due to supply bottlenecks). Then they failed to police it."

In late April, FERC announced a plan that would monitor California's electricity market and perhaps control wholesale prices: Set the price in times of shortage at the cost of the least efficient power producer, resulting in the highest cost for consumers. "That's exactly what OPEC does," Cooper says. "This is a market that has completely collapsed." FERC spokeswoman Barbara Connors insists the commission "didn't initiate deregulation in California," adding that the new system encourages greater efficiency in energy generation.