John Spears
Toronto Star
March 25, 2002

Encouraging low-income earners to take their chances with the fluctuating prices of Ontario’s soon-to-be opened electricity market is “frankly irresponsible,” says the province’s biggest salesman of fixed price energy contracts.

But energy watchdog Tom Adams warned yesterday that retailers have built escape hatches into their fixed price contracts that may leave customers vulnerable to soaring prices in some circumstances.

Deryk King, chief executive of Centrica North America, told a Toronto Board of Trade breakfast he is “dismayed at some of the information about electricity pricing that is making the rounds.”

Centrica owns Direct Energy, which sells natural gas and electricity contracts, and has agreed to buy Enbridge Home Services, which markets natural gas.

Door-to-door energy marketers have been criticized for using poorly trained sales staff, some of whom make price comparisons that are misleading, or use high-pressure sales tactics.

King said instances of unacceptable sales behaviour are relatively few, and criticized those who encourage consumers to avoid fixed price contracts.

“This is frankly irresponsible advice for those on low incomes who cannot take the risk of large increases in prices in their stride,” King said.

He compared taking a chance on floating electricity prices with taking a chance on a floating mortgage rate. Most homebuyers are willing to pay more for the security of a fixed rate.

King also objected to the “fiction” that those who don’t sign contracts are likely to pay 4.3 cents a kilowatt hour for the energy portion of their electric bills.

Most retailers are offering prices ranging from 5.7 cents to 5.95 cents a kilowatt hour, for terms of three to five years.

Under today’s regulated system, residential customers are paying about 4.3 cents for the energy portion of their electric bills, but King maintained it’s dangerous to compare today’s regulated price with the unknown future price in the market.

“No one can say with certainty that the spot price is going to remain stable over time,” he said; it could go “a whole lot higher.”

But Tom Adams, executive director of Energy Probe, said customers who expect airtight protection from electricity-price increases after signing a fixed rate agreement should read the contracts carefully.

Some contracts say prices aren’t guaranteed if a retailer fails to get the expected power from a supplier, perhaps due to a generator breakdown, Adams noted. Other contracts say the retailer is excused from its obligations for unspecified “circumstances or events beyond its reasonable control.”

What does that mean?

“It’s unclear how wide the escape hatch is,” Adams said in an interview after hearing King’s speech.

King said Centrica has put new controls in place to weed out unethical sales people.

Centrica has also bought one of the two companies that supply Centrica’s sales agents under contract, and is exerting more direct control over their training.

To deal with complaints that customers face long waits to get through to Centrica’s call centre, King said, the staff is being more than doubled. He couldn’t say what standard Centrica has set as its maximum waiting time for calls to be answered.