How Residential Retail Energy’s Utility Purchase of Receivables Fuels High Prices
In 2018 when I was researching Maryland’s retail energy market, I was puzzled: How did retail energy suppliers make profits if many of their customers weren’t paying their utility bills?
I had reviewed hundreds of low-income BGE bills with sky-high retail rates, especially for gas. Many accounts on retail energy were either behind or had been terminated. At that time, 21 retail suppliers were crawling through Maryland’s low-income ZIP codes selling over-priced energy door-to-door.
The culprit was Purchase of Receivables, a retail energy regulation approved in 2009 by Maryland’s Public Service Commission.
“POR” as it’s called, was a two-part regulation. Retail supplier charges were conveniently consolidated on regulated utility bills. And regulated utilities were legally required to purchase retail suppliers’ monthly account receivables. Regulated utilities in most Northeast states are responsible for retail supplier billing, collections, termination notices, terminations, account restoration and ultimately uncollectibles. Retail suppliers pay a nominal POR fees, or at least they used to small, to essentially eliminate credit and revenue risk. Suppliers get paid, even if their customers don’t pay. POR went live on Maryland utility bills in 2010
Not an easy concept to explain, our coalition made this YouTube to graphically explain how POR works. About 3 million Northeast retail energy families are billed with POR today. Maryland will have phased out POR by the end of 2025. There are currently no new residential retail energy offers in Maryland.
A Clearer Look at Electricity Prices—and Who’s Overpaying
After reading Jenya Kahn-Lang’s insightful study on electricity pricing in deregulated markets, I had one lingering question: How many people actually saved when they chose retail energy supply?
Her research highlights how aggressive, door-to-door marketing—especially in low-income neighborhoods—can lead to price discrimination. But the original charts didn’t show the BGE Standard Offer Service (SOS) rate, which acts as a key benchmark for comparison.
So I reached out and asked: Could you add the BGE Standard Offer Service rate to the chart?
Jenya kindly shared a new version of the graphic with that benchmark included—and it makes the story even clearer.
Jenya kindly shared a new version of the graphic with that benchmark included—and it makes the story even clearer.
This updated chart reflects hundreds of thousands of BGE residentialretail energy bills from September 2019. Each point represents the price a household paid for retail electricity supply that month. The black line marks the regulated SOS rate—around $0.08 per kilowatt hour.
Everything to the right of that line? Those are customers paying more than the regulated price. And the rates vary widely.
The small slice to the left—in purple—represents the "savers" who paid less. The savers were higher income accounts.The takeaway is hard to ignore: in just one month, hundreds of thousands of households—disproportionately in low-income areas—paid more than they needed to. Over the course of 2019 in Maryland, this “reverse Robinhood” story added up to over $89 million in excess payments beyond the SOS regulated rate.
Huge thanks to Jenya for sharing the revised chart and helping shine a brighter light on how marketing tactics and market design can impact affordability.
When Deregulation Hurts: How Electricity Marketing Practices Raise Prices for Low-Income Communities
Since the 1970s, U.S. policymakers have deregulated industries like telecom, airlines, and electricity to promote competition and lower prices. But in deregulated electricity markets, particularly for residential customers, competition hasn't always meant fairness—especially for low-income households.
A 2022 Energy Institute at Haas study finds that price discrimination is a key reason why competitive electricity prices vary so widely—even for the same power in the same city. In Baltimore, for example, a quarter ofretail energy households paid over 35% more than the median electricity price, and the top 5% pay double. Unsurprisingly, those paying the most often live in lower-income neighborhoods.
The culprit? Aggressive marketing tactics. Electricity suppliers in deregulated markets often use door-to-door or telemarketing strategies that target households less likely to shop around or switch plans—often those in low-income, densely populated areas. This type of marketing doesn’t just push higher prices; it’s also inefficient. The study estimates that unproductive marketing eats up 12% of the industry’s variable costs.
Key findings include:
Low-income areas face higher marketing intensity, leading to more expensive plans.
Firms exploit consumer inattention and search barriers, raising prices over time.
Most of the income-price gap (85%) is driven by supply-side marketing cost differences, not consumer behavior.
High electricity costs in poor communities have serious consequences, from unsafe indoor temperatures to decreased spending on food and medicine.
How to Buy “Green Electricity” for Your Maryland Home After SB1
For Your Home, How to Buy “Green Energy”
Community Solar farms offer residential customers subscriptions for a share of a nearby farm to support new, local solar energy that is fed directly into their local electricity grid.
2/27/25 Maryland families recently received letters and emails from their retail energy supplier informing them that their contracts were ending because of a new law called SB1.
What Marylanders should know is that retail energy suppliers are 100% able to offer consumers competitive rates under SB1, Maryland’s retail market was not closed down. Given a decade of terrible consumer pricing results, Maryland was forced to step in and add consumer protections. The issue suppliers have today is that their business models depended on charging exorbitant rates to most of their clients, while providing discounts to a few.
The good news is that Marylanders have options to save, and even go “green.” Plus, catch up on the real SB1 backstory to understand what’s happening in Maryland’s retail energy market.
Here’s 2 effective ways to choose clean energy for your home after 1/1/25:
1. Visit this Community Solar shopping link to find an open local solar farm in your utility area. Subscribing to a local Community Solar farm means you are supporting new, local, solar energy that’s fed into your utility’s local grid. More clean energy means less carbon-based electricity. Better yet, Community Solar has always offered a discount that beats retail suppliers’ supply rates because Community Solar’s discount applies to both delivery and supply charges. In 2026, Community Solar will offer a one-bill option as charges and credits will be included on Maryland regulated utility bills, similar to today’s retail supplier charges.
2. Want to mirror your retail supplier’s green energy offer? Buy Renewable Energy Certificates (RECs) directly for $10 per REC from Terrapass. One REC equals 1,000 kWh, about the average number of kWh your home uses each month.
Retail suppliers did not purchase wind or solar electricity from wind and solar farms. They bought digital “green” certificates on behalf of their clients.
Here’s how retail energy “green” energy works:
Maryland residences are connected to a vast electricity grid called the PJM. Retail suppliers made their “green electricity” offers by pairing unbundled RECs with our local PJM grid electricity. The same grid electricity that your neighbor gets who didn’t switch to a supplier.
The average Maryland residence uses about 10,000 kilowatt hours (kWh) per year. The average retail supplier, like CleanChoice, Inspire Energy, Green Mountain Energy or WGL, bought about 7 unbundled RECs per account each year to make their “green” electricity claims. Buying from Terrapass will cost about $70 per year whereas retail suppliers charged between $550 to $950 more.
At $10 per REC, you’ll be ahead financially because Marylanders paid hefty premiums to buy retail supplier “green energy.” As an example, in 2023, CleanChoice customers on average paid about $108 per REC purchased on their behalf. Tomorrow Energy customers paid $160 per REC purchased for them.
Curious how high were retail energy rates? Check out the chart below comparing Maryland’s Top 10 retail suppliers average supply kWh rate to the average regulated utility supply 10¢ kWh rate. I also produced this YouTube explaining how voluntary digital RECs turned into 100% renewable electricity.
Retail suppliers report their electricity stats to the federal government in EIA861.
Why SB1 was Needed
Maryland opened its residential energy supply markets to competition in 1999. It wasn’t until 2010 when the Public Service Commission approved a sweet regulation, called purchase of receivables, that retail suppliers flooded Maryland’s consumer market to compete with BGE, Pepco, SMECO, Potomac Edison and Delmarva regulated utility supply offers.
Yet 4 short years later during the 2014 winter Polar Vortex, the residential energy market began to sour. Instead of competitive energy’s promised “savings and innovation,” retail energy suppliers were charging sky-high variable rates that changed each month. During the 2014 Polar Vortex, retail supplier rates doubled, some even quadrupled. Complaints flooded into the PSC, yet Maryland supported retail energy for another decade.
While a few retail energy customers figured out how to play the “promo” rate game and hop from teaser rate to teaser rate, by 2022, 400,000 families paid hundreds more each year, sometimes thousands more, than if they had stuck with regulated electricity and gas rates.
From 2014 to 2023, Maryland families paid $1.5 billion more than regulated energy rates.
Worse, mountains of data revealed predatory door sales in black and brown communities, intentional pricing discrimination with low-income accounts paying significantly more, thousands of PSC complaints citing aggressive sales people, and fraudulent sales.
SB1 was passed into law May 2024. The law requires suppliers to:
Meet or beat regulated rates.
Disclose what types of RECs support their green energy claims.
Have the PSC approve green energy offers.
Eliminate purchase of receivables regulation (suppliers are now responsible for their bad debt, not regulated utility rate payers).
Gives regulators more tools for reporting, regulating, enforcing rules.
This web site has loads of data, articles, real bill samples detailing Maryland’s predatory retail energy market.
Jenya Kahn-Lang, a Berkeley Hass PhD student, produced an in-depth report using BGE retail choice data. She found that overall, no segment was saving and that low-income accounts paid the highest premiums compared to regulated electricity rates. The prevalence of a majority black demographic in a ZIP code explained 45% of the pricing discrimination. Maryland opened its residential energy markets to competition striving to help Marylanders, not to open the market for financial harm.