Pa. allows electricity shopping for low-income Peco customers

Peco's 140,000 customers who are enrolled in a subsidized low-income program will soon get all the benefits of shopping for competitive electric suppliers.

And all the risks.

The Pennsylvania Public Utility Commission approved a plan Thursday to allow enrollees in Peco's CAP Rate program to sign up with competitive suppliers, potentially reducing their bills.

But the PUC rejected a proposal by Peco and consumer advocates to limit suppliers from charging low-income customers more than the utility's default rate, the "price-to-compare" paid by customers who don't switch.

Consumer advocates are concerned that without the price protection, predatory suppliers might sign up low-income customers with attractive initial offers, including gift cards, and then boost their rates.

"Customers may end up paying rates more than they're presently paying," said Harry S. Geller, a lawyer with the Pennsylvania Utility Law Project.

Like all utilities, Peco is required by the state to offer a program for impoverished customers that sets rates according to their income. The discounts range from 23 percent to 93 percent of bills.

The cost - about $85 million last year - is picked up by Peco's other residential customers. So, if a low-income customer gets gouged, the cost will be shared by all.

"Those increased costs will be borne by the residential class as a whole," said Commissioner Gladys M. Brown.

While 544,050 of Peco's 1.6 million customers have switched suppliers since market rates went into effect in 2011, customers enrolled in the CAP program were required to keep the utility as their supplier.

The PUC in 2012 asked Peco to devise a plan to give low-income customers the option to choose an alternative supplier.

Peco's proposal would have required suppliers to not charge above the default rate. "This will ensure that the affordability of service will be preserved and avoids higher CAP costs for the residential customers that fund the program," Peco said in its filing.

But two of the state's biggest suppliers, Direct Energy and FirstEnergy Solutions, argued successfully that it would be illegal for the PUC to set a rate ceiling under the law encouraging electric competition.

The commission also rejected a suggestion by consumer advocates that suppliers should not be allowed to charge termination fees to low-income customers.

The new program will go into effect on April 15. Peco must conduct an education campaign along with the rollout.

"Customers have to be very vigilant in the type of offer they consider," said Tanya J. McCloskey, the state's consumer advocate. She suggested that customers should stick with offers that include a guarantee to stay below Peco's default price, which adjusts quarterly according to market conditions.

Commissioners also put suppliers on notice they have a "great social responsibility" serving the low-income market.

"The commission is certain to be monitoring these competitive market offers and supply prices very closely," said Commissioner James H. Cawley.