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07/14/07

By Tom Spoth, tspoth@lowellsun.com
Lowell Sun

If you're not happy with the price of a movie ticket, you have the option to go to a different theater, hit the video store, or read a book.

If you think your local grocer is ripping you off on a pound of apples, you can buy oranges instead, skip your daily serving of fruit, or head to another supermarket.

But what if you think your electric bill is too high? You don't have any choice except to write an angry letter, or just grin and bear it, right?

Not necessarily.

Competition is increasing in the electricity market, and consumers may be able to trim their energy costs by shopping around. But some say the potential savings may not be worth the time and effort spent researching different offers.

Greater Lowell consumers might recall a mailing sent out in January by a Virginia-based company called Dominion. Fliers promised a 10 percent savings over prices offered by National Grid, the area's dominant electricity provider.

It was an accurate representation of the deal: National Grid's price was $11.72 per kilowatt-hour at the time, and Dominion offered a rate of $10.50.

But a consumer who signed up might be kicking himself now. In May, National Grid's price dropped to $10.22, while Dominion's rate will remain fixed until May 2008.

Companies like Dominion and Stamford, Conn.-based MXenergy, the two "competitive suppliers" for residential customers that are approved by the state and active in National Grid's service area, attempt to offer lower prices through shrewd purchases of electricity. National Grid actually encourages consumers to investigate other suppliers and provides information on its Web site, because the company doesn't make any money from supplying power. National Grid's profits come from its energy-delivery service. If consumers switch to another supplier, National Grid still delivers the electricity.

National Grid spokeswoman Debbie Drew said competition is a good thing. "It's good that there are power suppliers out there making offers to consumers," she said.

Larry Chretien, executive director of the Massachusetts Energy Consumers Alliance, agreed. The presence of MXenergy and Dominion "keeps everyone on their toes," he said.

However, Chretien said he is skeptical that competitive suppliers have much to offer. The alliance provides consumers with discount home-heating oil by buying it in bulk, and has investigated providing low-cost electricity as well.

"We think it's very difficult to beat the utilities for electricity on price," Chretien said. "Not to say it can't be done, but we're dubious a competitive supplier can come in and consistently beat the utilities."

However, more than 100,000 households in Massachusetts believe they have found a superior alternative to National Grid and the other major players. Dominion has 86,000 electricity customers in Massachusetts, nearly all of them residential, according to spokesman Dan Donovan; MXenergy claims about 20,000 customers, all of them in National Grid's territory, said CEO Jeffrey Mayer.

Donovan and Mayer said consumers are often lured not by the promise of lower prices, but by a guarantee that costs will not fluctuate. Dominion and MXenergy offer "fixed rate" contracts that lock customers into a price for a certain period of time, often about one year. (MXenergy's price is currently $10.91 per kilowatt-hour, Mayer said.)

"It's similar to a fixed-rate mortgage as opposed to an adjustable rate," Mayer explained. "There's nothing in the world that's more volatile than energy prices. What we're doing is offering customers a way to protect themselves."

National Grid and other utilities are required to submit electricity-delivery prices for approval to the state Department of Telecommunications and Energy. Competitive suppliers must register with the state, said DTE executive director Tim Shevlin, but "they can charge whatever they want to charge."

Most companies sell energy in the Bay State only to businesses, shying away from the residential market. Because the so-called "default prices" offered by National Grid and other utilities are usually updated only twice a year, it's hard to gauge the competitive environment, said Chris Kallaher, director of government and regulatory affairs for Toronto-based Direct Energy Services LLC.

Direct Energy does sell electricity to residential customers, primarily in New York and Texas, but offers that service only to commercial customers in Massachusetts. (According to the Alliance for Retail Choice, an industry group for retail-energy suppliers, New York and Texas offer the best opportunity for companies to enter the residential market.)

With competition still a relatively new phenomenon, consumers could start to see more and more firms vying to power their homes. The Massachusetts market was deregulated -- meaning the utilities no longer were guaranteed the right to supply electricity -- in November 1997. It wasn't until 2003 that Dominion started to offer residential service in the commonwealth, and MXenergy didn't come on the scene until 2005.

Switching to a competitive supplier is fairly risk-free. According to National Grid, customers who make the change will still get the same response to emergencies and power outages, and will not be subjected to disconnection if their supplier goes out of business. It's still easier and more convenient to stick with the big utilities, but customers can make their decision based primarily on price.

"Customers throughout the country live with energy volatility every day," Mayer said. "They see it at the gas pump, they see it in their monthly (energy) bills. For a long time they couldn't do anything about it ... now they can do something about it."