Residential electricity experts in Pennsylvania are urging customers of PECO Energy Co., the state’s largest utility, to switch to an alternative electric supplier in order to start saving money on monthly electric bills.
Only 18 percent of PECO’s 1.6 million customers have left the utility and signed up with an alternative electric supplier, even though the utility’s price-to-compare is scheduled to increase about 4 percent — from 9.99 cents per kilowatt-hour to 10.4 cents — on July 1 and possibly again every three months after that.
Meanwhile, some alternative electric suppliers are offering fixed-rate plans of up to two years that are more than 10 percent below PECO’s default electric rate. In light of higher electric rates and periodic planned increases from PECO, electric customers in Pennsylvania should start shopping for electricity and lock in a fixed rate now before the hot, more expensive summer months arrive, according to Pennsylvania Consumer Advocate Irwin A. “Sonny” Popowski.
"There really are benefits for PECO customers to shop before the summer begins,” Popowski said in an interview with The Philadelphia Inquirer.
However, cheaper electric rates aren’t motivating nearly as many people to switch electric suppliers as they should, said Pennsylvania Public Utility Commission Chairman Robert F. Powelson.
Powelson said that despite discounts by alternative electric suppliers and an aggressive education campaign by the PUC on the ins and outs of electric deregulation, many customers are hesitant to switch because they mistakenly believe that PECO will punish customers who buy cheaper electricity from an alternative electric supplier.
On the contrary, Powelson said, electricity in a deregulated market can be purchased from any number of alternative electric suppliers and utilities don’t care which electric company customers use. PECO still makes a profit on every customer it delivers electricity to, regardless of who supplies the electricity. PECO collects a distribution charge, regulated by the PUC and including a profit, for every kilowatt-hour it delivers.
“You're just picking the commodity piece of your bill,” Powelson said. “PECO is agnostic about where you get your power. They don't care. So go out there and save money.”
How Deregulation Affects PECO’s Customers
Under Pennsylvania’s Electric Choice Act — which finally went into effect for PECO residential electric customers on January 1 after a decade of transition — getting power to your home is composed of three parts. The first part comprises all the companies that generate electricity. The second part comprises all the utilities, or “wires companies,” such as PECO, that are responsible for taking the electricity from the generation companies and distributing it to homes and businesses.
The third part is a retail electric supplier. Under the new law, electric customers are allowed to shop around and buy their electricity from an alternative electric supplier, also known as a retail electric supplier, who simply arranges to buy electricity from generators and sell it directly to customers.
However, if customers don’t switch, PECO is required by law to sell electricity to those customers. In such cases, PECO is required to act as a retail electric supplier as well and buy electricity from generators at the lowest cost and pass on any savings to customers. However, PECO isn’t allowed to make a profit on the electricity it sells. The resulting electric rate is known as the default rate, or price to compare, which PECO customers can use to compare the price they pay for electricity with what they would pay if they switched to a retail electric supplier.
According to PECO, there are now 38 active alternative electric suppliers serving residential electric customers in its marketplace, though only 26 have posted their offers with the PUC and Popowski’s office.
A typical residential electric customer who uses 750 kilowatt-hours of electricity a month can save about $90 a year by switching to an alternative electric supplier and locking in an electric rate lower that PECO’s. Those who use more power can save even more money by switching, Popowski told The Philadelphia Inquirer.
When the “rate differential kicks in, and if you have air-conditioning and you're using more than 500 kilowatt-hours a month, there's some real savings to be had,” Popowski said.
“Most Customers Opting to Stick With Peco — Forgoing Discounts,” The Philadelphia Inquirer, May 8, 2011.