Residential and commercial customers of PECO Energy Co., Pennsylvania’s largest electric utility, may want to consider switching to an alternative electric supplier before summer arrives.
Beginning July 1, electric rates for PECO’s commercial customers will increase between 9.4 and 12.6 percent, the utility announced. Cathy Engel Menendez, the electric utility’s spokesperson, said that the sharp price increases reflect the higher cost of buying electricity during the summer months.
PECO’s price-to-compare for small commercial customers will increase 9.4 percent, from 9.43 cents per kilowatt-hour to 10.32 cents. The price-to-compare for medium commercial customers will increase 12.6 percent, from 9.30 cents per kilowatt-hour to 10.47 cents.
The increases reportedly won’t affect roughly 60,000 small commercial customers who switched from PECO and now buy their electricity from an alternative electric supplier . However, about 100,000 small commercial customers who still buy their electricity from the utility are looking at bigger electric bills starting in July.
According to PECO, the GS Rate, or average monthly usage for general-service commercial customers, is 4,530 kilowatt-hours, which costs about $565 a month. The utility said that the average small commercial customer will see a $40 bump in their monthly electric bill.
PECO announced earlier that residential electric rates would also increase July 1, by 4.3 percent. The utility was more specific this week, saying that its residential price-to-compare will increase from 9.99 cents per kilowatt-hour to 10.42 cents. For residential electric customers who use more than 500 kilowatt-hours in a month, the utility will charge 11.69 cents per kilowatt-hour.
How Deregulation Affects PECO’s Electric Rates
Deregulation ended PECO’s ability to generate electricity, forcing the utility to purchase electricity from power generators and sell it direct — at cost and without markup — to customers that choose to buy their electricity from the utility instead of an alternative electric supplier.
PECO said that the prices it charges residential electric customers, called commodity charges, are based on procurement contracts the utility is able to sign with the electric companies that generate power. The long-term residential supply contracts are based on structured market-based auctions.
However, PECO’s commodity charges for commercial and industrial customers are more volatile than for residential customers because they’re more dependent on short-term spot market electricity prices and can fluctuate more dramatically each quarter.
While PECO’s electric rates can increase quarterly for all its customers, the electric utility’s distribution charge — the fee that the utility charges to deliver electricity to all of its customers, regardless of where they buy their electricity — is regulated by the state’s Public Utility Commission, which must approve any increase. The distribution charge is where PECO makes its profit, and reflects costs the electric utility incurs maintaining its wires and poles and customer service system.
“For Commercial Customers, PECO Will Raise its Price To Compare,” The Philadelphia Inquirer, May 18, 2011.