What customers need to know about purchasing electricity

Electricity bills in Massachusetts are divided into two general parts: supply, or the actual electricity purchased on the open market, and distribution, which covers the poles, pipes and wires that deliver the electricity.

Distribution is the responsibility of the utilities (e.g., Eversource, National Grid, Western Mass Electric, Unitel), regardless of whom the electricity is purchased from. When the power goes out, customers call their utility.

Supply is competitively priced, with numerous suppliers purchasing electricity from power plants and then selling it to customers.

Purchasing options
There are three ways to purchase electricity supply.

• From the local utility (National Grid, Eversource, Western Mass. Electric, Unitel, Cape Light Compact) or municipal utility (paying the default rate, which is set every quarter)

• From a competitive electricity supplier such as Constellation (the MMA’s endorsed supplier for the MunEnergy program)

• Through a third-party broker or consultant, who establishes the contract with a competitive supplier

A competitive electricity supplier, such as Constellation through the MunEnergy program, purchases electricity from the wholesale market and sells it directly to the customer. These suppliers often receive the endorsement of an association, like the MMA, which benefits the association and its members.

A broker or consultant is a person or firm that acts as an agent, usually representing the customer, in the sale and purchase of electricity. They strike the deal between the electricity supplier and the customer, but they never own the electricity.

Brokers always charge a fee, and customers should know what that fee is and how it will be paid. A broker may receive a flat fee or may charge a certain rate per kilowatt hour. The fee may be billed directly to a customer or, more typically, be embedded in the purchase price and disbursed to the broker by the electricity supplier. (There is nothing wrong with the latter arrangement, but it should be clear that the fee is still being paid by the customer.) Customers should ask how much the broker is being paid and beware of any broker who claims their services are free.

Many brokers will ask the customer to sign a letter giving them the exclusive right to secure electric prices on the customer’s behalf from various suppliers. By signing any type of exclusivity agreement, the customer gives up the option of working directly with a competitive electricity supplier.

Customers in the MunEnergy program work directly with an experienced representative from Constellation. Customers who prefer to work with a broker, however, may still work with MunEnergy by signing a “letter of inclusion,” which permits the MunEnergy program to provide the customer with a direct quote. This, in effect, provides a “price check” to ensure that the broker is securing the most competitive rates.

Customers need to understand the process and their options. They should ask suppliers and brokers how long they have been in business, check references, and ask colleagues and associates about their experiences.

Written by MMA Administration and Finance Director Paul Bockelman