Pa.'s wide-open market for home-utility customers

The power shopping season has arrived. No, not Black Friday. Not Cyber Monday.

A year after competitive suppliers entered Peco Energy Co.'s territory with campaigns to generate excitement about a commodity many regard as dull, the number of marketers targeting residential utility customers has doubled to nearly 40. Many are now preparing year-end offers.

The market is wide open. More than three-quarters of Peco's households are still supplied at the utility's default rate, even though they're paying 20 percent more this quarter than customers who signed fixed-rate deals a year ago.

Though Peco promises its price will decline Jan. 2, alternative suppliers are still offering fixed rates that can beat Peco's 2012 price by nearly 10 percent.

Despite promises of savings and the marketing efforts of regulators and suppliers, the public remains distrustful.

"This is a relatively new concept," said Richard J. Hudson Jr., the state chairman of the Retail Energy Supply Association. "There is some degree of customer trepidation."

Robert F. Powelson, chairman of the Pennsylvania Public Utility Commission, expressed frustration at a Nov. 10 hearing on electric competition that more customers haven't switched.

According to surveys presented to the PUC, many customers don't understand the market or they're worried they'll be penalized for switching. Some are not moved by the amount of the savings.

Under the state's electric choice law, utilities are solely "wires and poles" companies that distribute electricity. Customers are free to shop for a power supplier, whose charges make up about two-thirds of their monthly bill.

Utilities such as Peco earn their profits only on the transmission and distribution fees they get from all customers, regardless who generates the power.

For customers who don't switch, the PUC requires utilities to provide power without adding a markup - that's the default rate, also called the "price to compare." Though it contains no markup, Peco's price is higher than those offered by competitors because it must buy power through a combination of long-term contracts and spot-market purchases for an uncertain number of customers.

Retail electricity competition has also caught on in New Jersey, where nearly 11 percent of New Jersey customers have switched (compared with 25.2 percent in Pennsylvania). But New Jersey's system is not as hospitable to shopping. Where the Pennsylvania PUC and the Office of Consumer Advocate produce online shopping guides of comparative prices, New Jersey customers are largely on their own.

The Pennsylvania PUC is moving toward making shopping even easier. It wants to shorten the amount of time it takes for customers to switch suppliers, which now takes place only after a 10-day waiting period and then after the customer's next monthly meter reading.

"In today's world of instant gratification, it's quite shocking that it can take from 16 to 45 days and sometimes longer for a customer to switch to their chosen provider," Hudson said.

Irwin A. "Sonny" Popowski, the state's consumer advocate, says the proper measure of the success of competition should not be the number of customers who switch, since many customers who decide to stay with the utility have also made an informed choice.

And while cheaper rates are a key motivator, competition is also aimed at offering other options to customers - renewable energy sources, energy conservation assistance, and in the future, rates based on hourly consumption.

"Savings is critical, but energy choice is not solely about lower prices," said Michael Meath, a consultant with the Pennsylvania Energy Marketers Coalition who testified at the PUC.

Peco's current rate, which is adjusted quarterly, will decline from 11.14 cents per kilowatt hour (kWh) to 9.92 cents on Jan. 1.

Alternative suppliers are now offering 12-month fixed rates as low as 8.89 cents per kWh, which is 10 percent below Peco's upcoming rate.

What difference is a fraction of a cent? Each penny amounts to $90 a year in savings for a typical customer who uses 9,000 kilowatt hours a year.

Here are a few hints for power shoppers:

Customers who signed up a year ago for 12-month fixed rates should begin to see new offers from their suppliers. Some customers will automatically convert to a variable rate at the end of their term.

Though the initial prices of variable rate offers may be lower, they carry some risk because the suppliers adjust their price according to the market. Some customers this year discovered that their suppliers adjusted their rates during the summer well in excess of Peco's default rate.

Several suppliers add a monthly fee on top of their kilowatt-hour rates, effectively wiping out much of the savings.

Cancellation fees are a sore point for some customers. Most are fixed amounts, but one Canadian supplier, Planet Energy, assesses a cancellation fee based upon how much electricity the customer is expected to use in the future. Another supplier, Oasis Energy, includes a cancellation fee with a variable rate, putting the customer at risk of paying a penalty to leave even if the supplier raises its rates exorbitantly.

An online version of The Inquirer's comparison of current rate offers is at http://is.gd/21gsaM.

Pennsylvania's Public Utility Commission explains electrical choice and lists alternative suppliers: www.papowerswitch.com.

The Pennsylvania Office of Consumer Advocate will mail its Peco shopping guide free of charge: 1-800-684-6560.

The Board of Public Utilities lists alternative suppliers: www.nj.gov/bpu/assistance/utility.

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