Power To The People
CBS News This Morning Consumer Correspondent Herb Weisbaum gave us this report on power deregulation.
Until now, the annoying phone calls interrupting your dinner have often come from salespeople prodding you to switch your long distance phone service. Now get ready for a real shock. Soon, a new round of calls will come begging you to change your power company.
Starting this month, electricity deregulation comes to California. And the other states are gearing up to follow this "current" opportunity by year's end. If you thought picking your long distance company was a challenge, wait until you have to pick your electric company.
In the tiny town of Peterborough, New Hampshire, they already have. There, the citizens can tell you what effect power deregulation has had on their lives - and on their wallets.
At the Peterboro basket company - where they still make premium quality ash baskets the old fashioned way - business is booming. And despite the fact that owner Russell Dodds must run extra shifts to fill all his orders - keeping the lights and machinery going more hours - his electric bill is actually falling.
"Taking last year and this year," says Dodds, "We're seeing anywhere from a 15 to 20 percent difference in the total bill."
Deregulation has given Dodds and his neighbors a choice when it comes to power. The local electric company still owns the wires and delivers the juice. But customers can now choose the source of that electricity. And when the market opened up, the people of Peterborough had roughly 30 providers to choose from.
"They were calling every night and there were all kinds of direct mail campaigns and people in town passing out fliers," says David Sobe of the Peterborough Chamber of Commerce, recalling the battle of the electric providers. Adds resident Kristen Frickman-Miller, "I personally received about nine offers. And it just got to be quite a pile of papers on my desk."
Since choosing an electric company is something few people anywhere are primed to do, the people of Peterborough asked their town government to sift through the competing offers and make a recommendation. Charles Leedham and the other town selectmen jumped at the chance to break away from the local power monopoly.
"You and I and everybody else all of lives have been paying money to the power company," says Leedham. "If you didn't like the power company, too bad. You shut up or you bought a lot of candles."
Taking advantage of their new freedom, the committee chose Texas-based Enron Corporation. Besides offering lower rates, Enron won the competition by contributing to a downtown revitalization project that included new sidewalks and streetlights.
About two thirds of Peterborough's residents took the selectmen's advice and switched. Barber Bill Austin, however, decided to stay with the local utility. "I didn't thnk they could save me enough money to make it worthwhile," the barber explains.
Those who did switch like saving money. But they also like having a choice of power companies. Says one resident, "I'm always happy to see a big monopoly fall to its knees. It's a good thing. It's the American way."
Peterborough's experience with deregulation may not be typical. Because people here were among the first to have a choice, providers bent over backward to offer good deals. Critics fear that when deregulation spreads nationwide, small customers won't have enough clout to share in the savings.
"The average residential ratepayer is not going to be able to negotiate, doesn't have any bargaining power," says Dr. Mark Cooper of the Consumer Federation of America. "So there's a good chance their rates won't go down."
In fact, the fear is that some utility customers could see their bills go up - especially in rural areas or where prices are already below average. Critics also worry that reliability could suffer once the monopoly is gone and no one company answers for the electric power system from generation to delivery.
On the other hand, deregulated electricity can also result in more services, much like the phone companies came up with services we never knew we could not live without, such as call waiting. They may offer time of day rates, for people who ; do your wash at night and buy cheaper electricity when demand is down. You may have the option of green power - power generated from windmills or solar panels.
The downside to all this customer choice, though, will probably be customer confusion, with a barrage of marketing leading the way. And, as with phone service, there is also the possibility of "slamming," where unscrupulous companies switch your provider without your permission. Law enforcement agencies, though, are already gearing up for that.