Sub Prime  Electric

Bubbles are a tailor made condition. They are financial levitation fueled by euphoria.  P.T. Barium observed, “a sucker born every minute”. 

Financial bubbles tend to be wide spread, engulfing a whole industry or segment of society. Participation represents a “Hobson’s Choice”, or in the vernacular, “ you can not get a little bit pregnant”. 

What we have emerging today is sub prime electricity. People will be lured in and experience the same financial devastation as with sub prime real estate.

There are repeated advertisements to switch electric service providers. These companies often offer several cents per kilowatt of difference. But look closer. Some of these companies are really subsidiaries of the holding company of your current electric provider.  The question becomes why do they exist?

These other providers of electricity have been carefully structured legally to avoid key parts of a State regulatory process. They sell a 6 month contract with a guaranteed reduced rate. However, the devil is in the details. Early termination for contract default results in a draconian termination fee or revised rates. What would cause a contract default? One example is a credit score that no longer meets requirements. In case you had not noticed, the credit rating agencies have been surreptitiously lowering credit scores on a massive scale. The reason is simple. Lower scores translates into greater profits for businesses. 

The contracts of these electric service providers also allow them to change contract conditions at any time and in any manner they choose. So a “guarantee” is really not a guarantee.

Unfortunately the people most likely to flock to these offers are those most in need of leveraging their financial position. The ones that can least sustain another adverse financial impact. 

When you see these electric rate offers just remember how they work, “heads the electric company wins and tails you lose.”