The scramble to lure away Peco customers

With Peco Energy Co.'s rate caps expiring in about six weeks, the competition to lure its residential customers away is heating up more quickly than anticipated.

At least 11 alternative suppliers are offering residential electrical discounts up to 10 percent off Peco's 2011 supply rates, the Pennsylvania Public Utility Commission said.

And customers who secure long-term, fixed-rate deals now, in late fall, might realize even greater savings next summer, when Peco's default rate is expected to increase, said Irwin A. "Sonny" Popowsky, Pennsylvania's consumer advocate.

"I think we are off to a good start, similar to what we saw in the PPL service territory when its rate cap was about to come off at the end of 2009," Popowsky said.

Actually, the PUC said, the scramble to entice Peco customers to switch is even more intense than it was for customers of PPL Electric Utilities of Allentown when that market opened up a year ago.

By this time last year, only two alternative suppliers had made offers to PPL residential customers, whose rate caps expired Jan. 1. Thus far, PPL has seen the liveliest competition among the state's deregulated electric markets.

Peco has 1.6 million customers concentrated in Philadelphia and the four surrounding counties, an attractive target for suppliers saturating the market with direct-mail and mass-media campaigns.

Peco spokeswoman Cathy Engel said that about 22,800, or 1.5 percent, of its customers have already switched, mostly commercial and industrial accounts. About 5,400 of Peco's 1.4 million residential customers have signed up with new suppliers, she said.

One direct-marketing supplier, North American Power, is mobilizing legions of part-time salespeople to sell electricity to their families and neighbors through a multilevel organization structured like Amway and Mary Kay Cosmetics.

A second direct-marketing supplier, Stream Energy, is positioning its sales force to make formal offers Dec. 4.

Already, Peco customers have seen a range of offerings, including variable and fixed rates and discounts for seniors and veterans. Some impose cancellation fees for customers who leave before agreements expire, to compensate the supplier for making power-purchasing commitments on customers' behalf. Others allow customers to opt out without penalty.

The discounts are not as deep for customers who prefer to buy renewable energy, reflecting the higher price for green power.

Two suppliers, BlueStar Energy Solutions and Energy Cooperative Association of Pennsylvania, are offering 100 percent renewable-energy supplies at slightly less than Peco's default rate.

Some suppliers are telling Peco customers that their electric rates will increase 30 percent at the end of the year, which technically is true, but misleading. Peco's capped supply charges are increasing about 30 percent Jan. 1, but other charges will disappear at the same time.

The net result is that a monthly Peco bill will go up about 5 percent Jan. 1 if the customer does not switch.

Retail power markets are changing at year's end as a result of a 1996 law allowing customers to choose their electric suppliers. Peco's rates remained capped until the end of 2010 to allow for a transition period.

Under the law, traditional utilities like Peco will remain monopoly distribution companies and get a fee, regulated by the PUC, to compensate them for the cost of maintaining the wires and customer-service operations. But customers are free to shop around for a company that generates the electricity, which makes up about 60 percent of the electric bill.

Customers don't have to switch. The PUC requires utilities like Peco to secure a basic power supply for those who stay on. The cost for them is called the "price-to-compare."

The best offers now are coming in about 1 cent per kilowatt hour below Peco's price-to-compare.

"The choices are out there. Now, it's just making sure that people understand their options and know that even a half a cent can mean $60 or more a year," said Jennifer Kocher, PUC's spokeswoman.

The switch is not executed instantaneously. It can take two to six weeks to complete.

The delay is partly because the PUC requires utilities to confirm that customers have, indeed, elected to switch suppliers. That's designed to prevent suppliers from "slamming" customers - signing them up without their consent. The switch is also tied to customers' normal meter-reading schedule, so it may be delayed until the end of the billing cycle.

When shopping for power, there are a few things to keep in mind.

Peco's price-to-compare for residential customers will be 9.92 cents per kilowatt hour come Jan. 1. Pending final approval by the PUC, Peco's distribution charge, which is assessed no matter who supplies the power, will be 5.96 cents per kilowatt hour. So the overall charge for a residential customer will be about 15.88 cents per kWh.

Peco also collects a $7.25 monthly customer charge, regardless of consumption.

The price-to-compare (PTC) will adjust every quarter, depending on wholesale electric markets. The utility already has announced its residential PTC would increase from 9.92 cents to about 10.16 cents in April, up about 2.4 percent. Where market rates go afterward, Peco can't predict: A hot summer can drive up prices; a weak economy can keep them low.

Over the next two years, Peco will phase out the summer premium it adds to bills of customers who use more than 500 kWh a month. The so-called inverted block rate is still in effect in 2011 for Peco default customers and will add 1.2 cents for each kilowatt hour consumed above 500 - that's $12 extra for a customer who uses 1,500 kWh in the summer.

The inverted block rate will not apply to those who opt for alternative suppliers. But customers who lock in with a supplier that guarantees a fixed rate through the summer can avoid price fluctuations, as well as the Peco summer surcharge, potentially multiplying their savings.

For the 160,000 residential-heating customers who get a below-market rate for heavy use October through May, it may be best to stay with Peco's default rate for now. Alternative suppliers can't undercut the utility's offering.

The following suppliers have listed rate offers with the Pennsylvania Public Utility Commission (for more information on electric choice, go to http://www.papowerswitch.com):

BlueStar Energy Solutions; 1-866-258-3782, https://www.bluestarenergy.com.

Champion Energy Services; 1-877-404-0842, http://www.championenergyservices.com.

Commerce Energy; 1-877-226-5392, 1-800-556-8457; http://www.commerceenergy.com.

Dominion Energy Solutions; 1-888-863-9936, http://www.dom.com/products.

Energy Cooperative Association of Pennsylvania; 1-215-413-2122, http://www.theenergy.coop/Electricity/electricity.htm

Gateway Energy Services Corp.; 1-888-601-3141, http://www.gesc.com/PA.

North American Power; 1-888-313-9086, http://pa.napower.com.

Palmco Power PA; 1-877-726-5862, http://www.palmcoenergy.com.

Respond Power; 1-877-973-7763, http://www.respondpower.com.

Spark Energy; 1-877-374-8011, http://www.sparkenergy.com.

Verde Energy USA; 1-800-388-3862; http://lowcostpower.com.

Pennsylvania's Office of the Consumer Advocate has a free Peco shopping guide: 1-800-684-6560, http://www.oca.state.pa.us.

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