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District residents are frazzled by the new pitches of deregulated energy companies.
Cleveland Park resident David Marlin knows his way around legalese. During the mid-’80s, the lawyer served on a commission dealing with the minutiae of the District’s rent-control laws. These days, he chairs the D.C. Board of Appeals and Review, which, among other things, weighs legal decisions made by virtually every segment of District government.
Credentials notwithstanding, don’t ask Marlin about the varying price of natural gas per therm or the different pitches he’s been receiving lately from energy providers looking to cash in on the deregulation of the District’s energy market.
“It’s totally confusing,” Marlin says. “I’m lost.”
The indecipherable signals began a few weeks ago, when Marlin opened his front door to a salesman from PEPCO attempting to sign him up for a so-called fixed-rate contract for natural gas. The contract offered a monthly charge that was much lower than the usual rate of PEPCO’s competitor, Washington Gas.
But when Marlin later called PEPCO for more information, he found out that it wasn’t anyone from PEPCO who had knocked on his door that day. Not technically, at least.
When the District deregulated its energy market in 1999, advocates hailed the change as a major victory for consumers, promising the move would usher in lower energy prices and, perhaps most important, some much-needed competition for the region’s two biggest energy companies: Washington Gas and PEPCO.
Three years later, District residents have four, not two, energy providers to choose from. The catch? The two companies’ biggest competitors are Washington Gas and PEPCO, or, to be exact, Washington Gas Energy and PEPCO Energy Services—two wholly owned subsidiaries of the companies formed solely to take advantage of deregulation.
Over the past several weeks, both Washington Gas Energy and PEPCO Energy have sent their representatives door to door in a handful of neighborhoods, including Cleveland Park and Dupont Circle, in a drive to sign up customers. Not only are they pushing plans that undercut rates currently offered by their parent companies, but each is looking to underbid the other by offering energy packages that sell electric and gas service at fixed monthly rates.
For instance, in Cleveland Park last week, PEPCO Energy reps were promoting a natural-gas plan that billed customers a flat rate of $.479 per therm for a 12-month period, a nice bargain given that Washington Gas’ regular rate has gone as high as $.85 per therm in the past year. But Washington Gas Energy, the company’s subsidiary, countered both deals with a $.46-per-therm fixed price.
What is clear for Marlin and others is that deregulation means that there’s no better time than now to lock in cheap prices for energy. Both PEPCO Energy and Washington Gas Energy are offering fixed-rate contracts that can extend well into 2004, meaning that prices will be low in the short run.
Sound familiar? Shielding end-users from the ups and downs of the energy market was the stock in trade of Enron Corp., whose bankruptcy has rocked American capitalism. The Houston-based energy conglomerate pioneered the idea of fixed-price energy plans while building up its natural-gas business in California, among other locations.
In 2005, the District is set to roll back price controls that are purposely keeping rates low to increase competition. Right now, both Washington Gas Energy and PEPCO Energy are intentionally charging customers lower prices to boost their markets, even if that means losing money in the meantime.
D.C. People’s Counsel Elizabeth Noel believes that, come 2005, prices will skyrocket, largely because there’s no real choice currently between PEPCO and Washington Gas. Added to that, PEPCO, the parent company, has announced that it will stop generating and distributing electricity in 2005, instead shifting its business focus to that of its subsidiary, PEPCO Energy, which simply buys and resells energy.
“The purpose of deregulation was to create an environment where there is competition, but right now, we really don’t have that,” Noel says. “Sure, we have lower prices, but they are being offered by essentially the same two monopoly companies that have been serving our region for years. At one point, you have to wonder why we went through restructuring at all, if we are just going to end up with the same two companies we had in the first place.”
But Don Lintvet, PEPCO Energy’s vice president of marketing, downplays the negatives of deregulation, though he admits it’s too soon to tell.
“There’s no way to predict in absolute terms what is going to happen,” he says. “But, ultimately, deregulation will foster more competition and lower prices. That’s our hope, at least.”
Of course, 2005 seems a long way off for residents who are choosing among the various plans being offered right now. Over the past few weeks, e-mail messages debating the pros and cons of varying PEPCO and Washington Gas plans have shuffled back and forth on neighborhood news groups.
Most of the messages include questions about deregulation, but, in some instances, individuals have offered cautionary tales about committing to the fixed-rate plans. One author signed a contract with Washington Gas Energy at a flat price of $.59 per therm last year.
When the price of natural gas began dropping, the writer says, he contacted Washington Gas Energy to see if it would lower his price to what it was offering other customers. It refused.
“Washington Gas, like all the other deregulated utilities, is making out like a bandit while the little guy pays well above market for the product,” the author writes. “Just make sure you understand what you’re getting into.” CP