Helpful Information Regarding Power Supply and Offers

Helpful information for consumers evaluating competitive supply options:

  • The price of electricity is higher during the winter months (Jan-March) because of the natural gas pipeline constraint issues, than in the spring and fall shoulder months.
  • This dynamic is causing power suppliers to market heavily by offering teaser rates (short term rates similar to credit card introductory rates which will then increase), or by offering long term rates. Fixed periods for teaser rates will generally end just as most the expensive months begin – raising costs for the customer and making it harder for them to find another supplier willing to offer them an attractive rate. Longer-term (one year or more) offers may look attractive relative to CLC’s price during the first half of the year, but there’s reason to believe that CLC’s rate will be lower during the second half of the year, for the reasons explained above. It’s a matter of averaging – the first half of the year has more expensive months, and the second half less expensive. It’s not because suppliers making these offers are somehow able to find cheaper electricity – most electricity is bought and sold through the same market.
  • Consumers are encouraged to read all of the terms and conditions of the contract before signing up. They should consider the following:
    • Check the length of the contract. What will happen once the contract term is over? What will the rate be? Will it be a monthly variable rate that the customer has no control over?
    • Are there termination fees if someone wants to leave the contract early? A lot of suppliers are charging at least $50 to leave a contract.
    • Are there monthly service fees? There are some suppliers that charge a $4.95 monthly service fee in addition to per kWh charges.
    • Are there provisions allowing for the “fixed” price to change if there are regulatory or governmental changes?
    • Are there provisions allowing for the supplier to terminate the contract if it is no longer economically feasible for the supplier to continue?
    • If your usage changes or if you sign up for net metering, will your price change?
  • Things that consumers should keep in mind when evaluating offers:
    • Never give your electric account number out over the phone. With the account number, the supplier has the ability to switch your account from your current supplier to their supply.
    • Never sign up or commit to a new contract over the phone. Verbal offers may not provide you with all the terms and conditions of the contract you are about to enter into.
    • Always ask for literature or a written contract, so that you may review the material at your leisure and without the pressure of the solicitor asking you to sign up for their offer.

Explanation for Cape Light Compact’s increase for December – July 2015 supply prices:

  • All suppliers in the New England region are facing these high prices.
  • Natural gas is the primary source for generating electricity (~50% of electricity in New England is generated from natural gas).
  • The problem is, in the winter months when we’re using natural gas for both production of electricity and heating, we sometimes consume natural gas as essentially quickly as the pipelines can bring it into New England. This causes winter prices (especially January, February, and March) to skyrocket, sometimes three to four times higher than the spring and fall months. There are no new pipelines likely to change this dynamic being built for at least several years.
  • Because January, February, and March are so expensive, prices are expected to be high during the first half (January – June) of the next few years.
  • The second half of upcoming years (July-December) are expected to be lower than the first half, because the second half doesn’t include the most expensive winter months. We expect this seasonality to persist for at least several years.
  • Falling oil prices will have minimal effect on electricity prices – in 2013, less than 1% of New England’s electricity came from oil. And, even with the recent fall in prices, natural gas is still less expensive than oil during most of the year.

As always, feel free to contact our offices at 508-375-6644 with any questions you may have.

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