PUC is putting Pa.'s default system in play

Robert F. Powelson, the chairman of the Pennsylvania Public Utility Commission, is not impressed that 18 percent of Peco Energy Co.'s electric customers have switched suppliers since Jan. 1.

"That's great," Powelson said in an interview. "What's the problem? Eighty-two percent are paying the default rate. They're paying a premium. Shop. Save money."

Powelson, appointed to the commission in 2008 and promoted by Gov. Corbett to chairman this year, is leading a charge to review the state's deregulated electricity markets. The commission voted April 28 to study the system. Hearings begin in June.

Powelson admires the Texas system, where more than 80 percent of electric customers shop for a supplier.

Texas forces customers to choose a supplier. Pennsylvania requires utilities like Peco to provide default service to those who don't want to shop.

"We have an inherent flaw in Pennsylvania," said Powelson. "Unlike Texas, where customers have to shop, [and] there's no such thing as a default supply."

Not everybody thinks the Pennsylvania system is flawed. Utilities are required to provide power at the lowest cost, and to pass it on to customers without markup. Advocates say the system protects customers who don't shop and provides the market with a reliable benchmark for competitors to beat.

"I actually think the system we have is a good one," said Irwin A. "Sonny" Popowsky, the state's consumer advocate. "Customers can shop and switch, and they know, if something happens to their competitive supplier, they just go back to the utility. The system we have has the protections we need."

PUC Commissioner Tyrone J. Christy, who was the lone vote in April against the formal investigation of the electric markets, said it was premature to undo the current default-service arrangement. Although the Pennsylvania legislature approved the Electric Choice Act in 1996, deregulated markets became fully implemented only this year.

"To me, a measure of success in competition is not only are people shopping, but are consumers getting an attractive least-cost option?" Christy said in an interview Friday.

Critics say the Texas system has led to a free-market free-for-all that does not always function in the consumers' best interest.

"We've got real concerns about the Texas model," said Tim Morstad, AARP'S associate state director in Austin, Texas. "We would advise any state to think twice before going down Texas' path."

Texas got rid of its default model in 2007, forcing customers to choose between a dizzying array of offers from suppliers. But Morstad said consumers must remain vigilant about changing rates, hidden fees, and complicated bills. He said consumer complaints have increased dramatically.

"Once you get rid of the oversight, it gets really messy," he said.

"When you lose the default rate, the regulators see themselves as promoters of competition rather than as protectors of consumers."

Popowsky, the Pennsylvania consumer advocate, said Pennsylvania's system requires utilities like Peco to conduct transparent auctions to procure the lowest-cost supply.

"If a marketer can come in, by doing their own purchasing, timing the market, if they can do a better job and get people to shop, that's great," he said. "And we certainly encourage people to look for alternatives.

"But we know a lot of customers are not interested or don't want to shop, they're just as happy to stay with their default service provider," he said. "Is there a reason to think that someone other than Peco can do a better job for customers who don't want to shop?"

Powelson said he believed most Peco customers were paying too much for the default supply, but didn't shop because they mistakenly believed it would hurt the company if they switched. Consumer-education efforts have been unable to move the market on their own, he said.

"Maybe I'm trying to rush this along too far," he said. "But at the end of the day, customers know, if I pick a supplier, it's not going to hurt Peco's bottom line one iota. Once we get past that hurdle, then I think you'll see numbers move up.

"Stay tuned."

Peco Energy Co. responds to customer questions at http://www.pecoanswers.com

Pennsylvania's Public Utility Commission explains electrical choice and lists alternative suppliers

at http://www.papowerswitch.com

The Pennsylvania Office of Consumer Advocate will mail

a Peco shopping guide for free: 1-800-684-6560.

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