OHIO — A recent study done in Ohio shows residents would save more money if they stayed with their default electricity company versus shopping around for other offers and switching.

What You Need To Know

  • The study included a database of 2 million records that look at every electricity offer made to Ohio consumers over a nine-year periods

  • Over the past decade, 72% of the most popular type of retail electricity offers were far above default price consumers would pay if they stayed with their default company

  • Historically, competing companies have made offers averaging 25% to 30% above the standard offer

Lead author of the study and Ohio State professor Noah Dormady, along with his team, built the largest, detailed database of retail electricity choice offers to ever be put into a study. Through this database, they looked at every electricity offer made to Ohio consumers of a nine-year period from 2014 to 2023.

Ohio State said the database totals more than 2 million records.

The study found 72% of the most popular type of retail electricity offers over the past decade were actually far above the default price consumers would pay if they stayed with their default company and didn’t shop around.

It also found that competing companies have historically made offers that averaged 25% to 30% above the standard offer. When they offered cost savings, the offers were only 5% to 10% below the standard offer, according to the study.

“The savings are considerably smaller than the price increases they offer,” Dormady said.

In Ohio, residents are overwhelmed with choices for electricity, Dormady noted. The study states there are between 90 to 150 supply offers filed by around 45 different Public Utilities Commission of Ohio suppliers. In Ohio, households who can’t or choose to not shop for another electricity service will stay with their utility’s default service. Customers who shop can choose from around 50 competing suppliers among six major utility service customers in the state.  

Dormady said while these markets have offered households and businesses with cost-saving supply offers over the years, “It’s unfortunate that cost-saving offers have been so few and far between,” he said.

The study suggests there are consistent market failures in the deregulated market, and while the study was done in Ohio, Dormady said the issue reaches far beyond the state.

“The problems we document here exist in other states and in parts of Canada and Australia, too,” he said. “We are continuing the work we did here in other states to learn more.”

Dormady said in theory, all electricity retail prices would be set based on the wholesale prices since all competing companies buy their electricity from the same wholesale markets. However, what’s happening is companies are competing based on standard price. Dormady said the standard price has already been marked up about 73% over the price on the wholesale market.

Another issue highlighted in the study was that not all consumers have access to cost-saving offers, which were only available less than 60% of the year, depending on the year studied.

“Even if consumers shopped for the best prices on electricity every day – which most people are not going to do – they would only find savings about half the time,” Dormady said.

While the current market has its issues, Dormady said his team doesn’t think the solution should be to go back to a regulated system. Instead, he believes there should be more efficient markets and more transparency. One idea the team highlights is creating an Office of the Independent Market Monitor to ensure efficiency.

Additionally, the team suggests a “supplier scorecard” for rates on quality and competitiveness. It would be similar to a Better Business Bureau rating.

“We need to make it easier for consumers to identify the electricity offers that will save them money and that are right for them,” Dormady said. “Unfortunately, it is too easy to confuse consumers in a complex market like this.”

The study was published in the Journal of Critical Infrastructure Policy.