PECO Energy Co. (PECO) has begun notifying residential electric customers that two of the power utility’s most popular discounted heating rates are set to expire.
The Philadelphia-based electric utility is phasing out its discounted heating rate, referred to as RH, and its off-peak heating rate. The RH provides a discount of about 45 percent to customers who consume more than 600 kilowatt-hours per month during the winter, which PECO said helps its RH customers lower electric bills by an average of about 5 percent a year. The off-peak rate provides a discount of about 70 percent, but only for power consumed by a water heater connected to a separate meter that prevents electricity use during peak hours.
The discounts on these rates will be cut in half on Jan. 1, 2012 and will be eliminated totally by the end of 2012.
About 141,000 of PECO’s residential electric customers get the RH discount while about 65,000 get the off-peak rate. About 9,000 residential electric customers get both discounted rates.
PECO said it was ending the discounted rates as required by the Pennsylvania Public Utility Commission (PUC). The discounted rates were put into place decades ago to encourage Pennsylvanians to switch to electric heating. But then electric deregulation allowed competing alternative electric suppliers to enter the market and sell electricity to electric customers in PECO’s service territory.
In order to compete with alternative electric suppliers and ease the transition to deregulation, the PUC allowed PECO to offer the discounts, which were subsidized by other PECO customers. The result was that the electric suppliers were essentially unable to compete for PECO’s discounted RH and off-peak customers because the electric utility’s default rate for those customers was allowed to be below market rates.
Now, however, the PUC has mandated that PECO end the RH and off-peak rates.
PECO began sending notifications about the end of the RH and off-peak discount rates to residential electric customers in June. The electric utility said it’s planning on notifying affected residential electric customers by sending about 11,000 letters each week over a four month period.
PECO said it expects alternative electric suppliers to make competitive offers to its customers next year as the rates expire.
Of PECO’s 1.6 million customers, about 300,000 have switched to alternative electric suppliers since Jan. 1.
“PECO to End Discount Rates, Braces For Complaints,” The Philadelphia Inquirer, July 6, 2011.