A hard lesson for consumers

March 3, 2014

Latin has been pegged as a dead language by some, and has largely vanished from classrooms, but the phrase “caveat emptor” has taken on new, urgent life across much of Pennsylvania in the last month or so.

“Caveat emptor” means, more or less, “let the buyer beware,” and it’s been summoned out of those musty, unloved Latin dictionaries to illuminate the predicament in which many consumers have found themselves.

They have been opening electric bills and reaching for the smelling salts when they discover that their monthly charge is about equal to the price of an original work by Picasso.

OK, maybe not that much, but bills in the $900 range, or that creep over the $1,000 mark, have not been unheard of.

As detailed in a story by Business Editor Michael Bradwell in Sunday’s Observer-Reporter, many consumers who ditched default electricity providers like West Penn Power in favor of alternative companies, as they have been able to do since electricity was deregulated in Pennsylvania almost 18 years ago – an initiative, it should be noted, that was championed by disgraced Enron CEO Kenneth Lay – are finding their monthly charges skyrocketed thanks to the relentless, seemingly endless winter we are enduring.

If consumers rely on electricity to heat their homes, and they have not read the fine print of their contracts and they are subject to variable rates, they may have to bust open more than one piggy bank to pay their bills.

Two weeks ago, the Public Utilities Commission began scrutinizing how these alternative providers – who, in many cases, come with murky pedigrees – educate consumers about the ins and outs of their contracts and the rules and policies contained therein. If someone comes and raps on your door on a sunny autumn day, when the windows are open, the air conditioner is off and the furnace is still a few months from being used, and wants you to switch electricity providers, it’s easy to be seduced by promises of quick cost savings. Sticker shock, as we have seen, can come later and arrive with a jolt.

PUC Vice Chairman John Coleman Jr. and Commissioner James H. Cawley stated something that can’t be overemphasized: “The rate consumers pay in the retail electric market is governed by the terms of their contract with their supplier. It is important for consumers on variable rates to carefully review the terms and conditions of their contracts to determine if they are at risk for large rate increases at any given time.”

As Bradwell pointed out, some of the alternative electric providers are perhaps not engaged in price-gouging, a practice that is illegal in Pennsylvania. But they are subject to the vagaries of the “spot market” for electricity in a way that more established providers are not. When demand is at extraordinary levels, they end up having to pay premium prices.

So, as many folks let the shock of last month’s bills sink in and they wring their hands about what to expect this month, this should serve as a lesson – in a deregulated world, where consumers have, theoretically, been empowered, it’s up to them to do the homework. This means more than just glancing at a brochure proffered by someone who comes to the door while dinner is being fixed, but doing research, getting out the magnifying glass to read the fine print and asking lots and lots of questions.



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