PECO no longer only option for southeast PA residents

Electric rate caps are a thing of the past for PECO Energy Customers. As of January 1, 2011, the era of electric choice began in Bucks and Montgomery Counties as well as the rest of Southeastern Pennsylvania.

Pennsylvania lawmakers decided to open up the electricity market to competition with the passing of House Bill 1509 (also known as the Electricity Generation Customer Choice and Competition Act) back in 1995, which eliminated the energy monopolies held by current providers. Laws enacted more than a decade ago came into effect and changed the way 1.6 million people turned on the lights on New Year’s Day 2011.

In 2000, Pennsylvania finalized energy deregulation when legislators put a 10-year rate cap into place designed to allow utilities to recoup their generation investment costs, and to give suppliers the opportunity to prepare for competition in the open market.

PECO’s cap expired on December 31, 2010, and now customers in the Delaware Valley are faced with choosing from 17 alternative electricity suppliers. No matter which company customers chose, however, PECO will continue delivering power to consumers’ doors.

“Customers can shop for a supplier or they can stay with PECO and we will purchase energy on their behalf,” said Cathy Engel, PECO’s manager of communications. “They can change at any time and they can come back to us at any time.”

One of the forces driving electric deregulation legislation in the 1990s was the cost of electricity in Pennsylvania. This state’s rates were 15 percent above the national average according to the Pennsylvania Public Utility Commission. As a result, a movement to try to reduce the costs formed, coinciding with changes occurring at the federal level that allowed for the unbundling of utility services.

During that same decade, though, the price for electricity remained lower than the cost the utility companies paid to purchase it. “For PECO, we had rate caps on our bill for more than a decade,” Engel said. “It regulated the price on kilowatt hour, not the market price.”

The intent of the decade-long cap was to allow utility companies to recover their costs through a transition charge on customer’s bills. This transition charge is being phased out, but PECO petitioned and was approved by the PUC for natural gas and electricity delivery rate increases.

The impact on PECO customers will begin on Jan. 1, 2011, and will be 5 percent. The monthly electric bill for a homeowner using 500 kWh will increase about $5.06 from $81.58 to $86.64 under the new regulations. The new natural gas monthly bill for a customer using 800 cubic feet will be an additional $4.41 from $90 to $94.41.

These increases, approved by a 5-0 vote by the PUC on Dec. 16, 2010, are expected to reap PECO $19.6 million for natural gas and $225 million for electric delivery. Those figures represent PECO’s first electric delivery rate request since 1989 and the second natural gas delivery rate request in 23 years.

Confused on how these changes will affect your energy bill? Through all the noise, the change is very simple to understand. Approximately two-thirds of utility costs are the actual electricity the customer uses and one-third is dedicated to its delivery. The rate cap expiration impacts the electricity supply portion of the bill. Delivery will still be controlled by PECO.

In the Southeastern Pennsylvania energy market, 17 suppliers have been reaching out through direct mail, media outlets or going door-to-door to offer customers an alternative to PECO. Some suppliers waited until the cap rate expiration because with the caps in place, they could not compete with PECO’s rates. Now well into 2011, more suppliers will enter the fight to grab a portion of the open energy market in this area.

The energy supply market is becoming more lucrative every year as lifestyle changes increase the amount of energy residential and commercial customers demand.  Electricity demand has increased during the last decade as consumers use more electronic devices, equipment and appliances on a more frequent basis. Even with efforts to decrease electric use – such as the introduction of energy- efficient light bulbs and the development of increasingly energy-saving kitchen appliances – consumer demand for electricity has steadily risen in recent years. 

One of the major reasons for this increase in energy use can be attributed to increased affordability of electronic devices and appliances. Plasma televisions, for example, use more energy than standard televisions, and computers are far more prevalent in customer’s homes now than they were a decade ago. Price decreases on these electricity-demanding items have allowed consumers to purchase and utilize multiple televisions and computers for their homes or businesses, resulting in a bump in energy demand.

For many consumers, switching energy suppliers can help lower utility costs. Kocher said consumers can realize as much as a 10 percent reduction in their bill, but that could vary. “It will depend,” she said. “It will depend on what happens in the wholesale market. It will depend on what people do and it will depend on how much electricity people use.”

The base rate customers can use to compare costs is called the “price to compare” and for PECO, that’s 9.92 cents per kilowatt hour. If looking to switch electricity suppliers, customers should first determine if alternative suppliers’ rates are fixed or variable. A fixed rate is fixed at a specific rate for an extended period of time, while a variable rate depends on the terms of that agreement and can vary based upon the market and market prices.

Not everyone contemplating change is motivating by the desire to save money. For some people, the source of their energy is the catalyst for changing suppliers, since some suppliers offer electricity generated from renewable sources. Approximately 3.5 percent of PECO’s electricity is generated by renewable sources currently, and that percentage will increase 0.5 percent a year to 8 percent in 2020.

Energy customers will have greater flexibility to review options in advance as well as the opportunity to choose from product options that work best for specific energy demands. Some products offered by other energy suppliers differ from PECO’s offerings, such as demand response opportunities not currently available to PECO customers. These options can be individually tailored now for the consumer’s needs, whether residential or commercial. 

For those customers choosing not to sign up with a new energy supplier, PECO will remain their supplier by default. No matter which energy supplier a consumer chooses, in the case of a power outage, customers should still call PECO since that utility will continue to be responsible for energy delivery.

PECO is one of the last utility companies in Pennsylvania to have rate caps expire. Rate caps came off for PP&L customers last year and about a third of PP&L customers switched suppliers. When their cap rate expired, PP&L’s rates increased 30 percent, significantly higher than the expected 5 percent PECO hike.

The opportunity to change providers has no deadline, timeline or cap. Consumers can switch energy suppliers at any time, and as many times as they feel necessary.

The Pennsylvania Public Utility Commission has a website dedicated to the electric deregulation at www.papowerswitch.com. Consumers can switch by signing up with any supplier listed on the PUC’s website, but the actual transfer can take between two to six weeks depending on when the electric meter is read.

PECO also has information available on their website. For residential customers, go to: www.peco.com/pecores/energy_rates/energy_choice.

Businesses should be check out:
www.peco.com/pecobiz/energy_rates/energy_choice.