Fees skew electricity "price to compare" numbers

A small number of electricity suppliers are employing a new trick to make their rates appear more competitive: They're tacking on a monthly fee in addition to the kilowatt-hour rate.

A monthly fee skews the calculus when trying to compare suppliers based on kWh rates, the so-called price to compare. When evaluating suppliers, you need to be sure you're basing your decision not just on the price to compare, but also on the total monthly charge.

Only five of 47 suppliers listed for Peco customers on the Pennsylvania Public Utility Commission's website (papowerswitch.com) charge the fees, which are all about $5.

A $4.95 monthly fee may not sound like much, but for a typical Peco customer who used 8,300 kilowatt hours last year, it would translate into an added cost of 0.7 cents per kWh. For a customer using less electricity, a monthly fee raises the effective rate even higher.

For example: If a hypothetical company promised to match Peco's price to compare but also assessed a monthly charge of $4.95, its effective price for a typical Peco customer actually would be 8.5 percent higher than Peco's default rate of 8.2 cents per kWh.

There may be some economic reasons for charging a monthly fee to recover a supplier's fixed costs that don't vary depending on a customer's usage.

Mostly, however, it seems to be a marketing gimmick: The PUC's site lists the kWh "price to compare" in bold type; the monthly fee is in small print.

The PUC's online tool calculates the fee when it estimates each supplier's monthly charge. But that means the kWh "price to compare" is not really the price to compare.

You can do the calculation yourself if you know how much power you consume a year (it's listed on Peco's monthly bill).

Or you can keep your calculator in the drawer and send a market signal to those suppliers who charge monthly fees: On the PUC's website, you can filter out such offers by clicking on "no monthly fee" in the menu on the left.