[BETA] Fortnightly

Consumers appear unaware. Pilot programs seen under-subscribed.

TWO REPORTS RELEASED SIMULTANEOUSLY IN WASHINGTON, D.C., appear to confirm the worst fears of parties to the utility restructuring debate (em that consumers are unaware of deregulation and very few have taken home any real benefits. On Sept. 4, Yankee Energy System Inc. and International Communications Research Inc. jointly released survey results showing that two out of three Americans are still unaware of utility deregulation.

The same day, the Electric Consumers Alliance released the results of the New Hampshire retail competition pilot program study. The survey found policymakers must address education and protection measures if consumers are ever to gain any benefits from retail energy competition.

Yankee Energy: Many Seem Skeptical

According to Branko Terzic, chair, president and CEO of Yankee Energy System, while public awareness of deregulation is low, it is growing. Terzic explained that the energy debate is missing a "cataclysmic event," like the breakup of AT&T, which rapidly spread consumer awareness of deregulation in the telephone industry.

Terzic said that in 1996, only 22.9 percent of Americans were aware of the changes under way in electric deregulation, while 33 percent were aware in 1997. Terzic pointed out that most of that increased awareness came from people in the Northeast (40.8 percent) and the West (41.6 percent) where the most deregulation activity has taken place.

The survey said most consumers wanted deregulation to lower rates and improve service. Terzic said, however, that many respondents seemed skeptical that lower rates will occur. "[And] I think they should be," he added.

While nearly half the households polled said deregulation would lower electric rates, 41 percent said electric rates would increase. Also, 46 percent of respondents believe unbundling would increase natural gas rates, while 38 percent said it would decrease rates.

Terzic noted that in 1996, level of service was not even an issue to those polled, but in 1997 it had crept into the debate. "Perhaps we've heightened expectations," he said.

ECA: Confusing for Consumers

Although participants of the New Hampshire pilot program are guaranteed rate reductions of at least 10 percent, the ECA study found that residents are not subscribing. The Exeter Associates' study is the pilot's first thorough evaluation.

"What we found in our analysis of the New Hampshire pilot is that the benefits that deregulation supporters promised have yet to materialize for the average consumer," said ECA Executive Director Robert Johnson. "The study also found that deregulation is a confusing proposition for consumers and that substantial consumer education efforts are necessary for deregulation to benefit the consumer."

The report's review of the pilot is preliminary because only nine months of results were studied. However, it found that initial implementation of the pilot began with a myriad of up-front problems, including: regulatory disputes, particularly over stranded costs; tight deadlines imposed for initiating the pilot; inadequate customer education; and confusing marketing data from competitive suppliers. Many marketers left the state after securing customers, making it difficult for consumers to switch suppliers. Yet after the start-up, those problems tended to dissipate.

It also found that