Electric choice regains its footing, after 2014 polar vortex blew it off balance

More than two years after 2014's polar vortex rattled retail electricity customers with eye-popping price spikes, Pennsylvania's competitive power business is only now showing signs of stabilizing.

The number of customers served by third-party electricity suppliers declined 5.6 percent in the last two years, according to the Public Utility Commission's Retail Electric Choice Activity Report for 2015. More than 56,000 customers, or 2.7 percent, abandoned competitive suppliers in 2015.

"On the shopping front, I'm nervous we hit a wall," Robert F. Powelson, a PUC commissioner, said Tuesday. The price advantage that competitive suppliers enjoyed during the early years of retail electric competition has eroded, he said, prompting more customers to return to their default service providers, utilities such as Peco Energy Co.

But the competitive market appears to have recovered somewhat this year, as alternative suppliers captured a net gain of 32,000 customers in the first seven months of 2016, according to monthly PUC reports. The new enrollments are the first sign of growth since the fallout from the rate shocks of 2014.

Five of the state's seven large utilities reported growth in the number of customers who switched suppliers this year, according to the PUC's monthly data. Only PPL Electric Utilities in Allentown and Duquesne Light in Pittsburgh showed continued erosion.

The PUC's 47-page annual report (available at http://bit.ly/2bTYfRD) is a year-end snapshot of retail electricity markets, which were opened to full competition at the end of 2010. In states with electric choice, retail customers can choose to buy their power from a competitive supplier, though they still pay monopoly utilities to deliver the power on their distribution networks.

At the end of 2015, about 2.05 million customers, or 36 percent of the state's 5.7 million, were served by competitive suppliers, down from 2.17 million at the end of 2013. Though they are a minority, customers who shop tend to be big users and collectively buy about 67 percent of the power that moves over utilities' wires.

Competitive power markets grew robustly from 2011 through 2013, but they hit the skids after January 2014, when a severe cold snap caused wholesale power costs to spike.

Some suppliers slammed their variable-rate customers with bills that were double, triple, or even quadruple the typical rate, sparking a regulatory and political backlash.

In Pennsylvania, four suppliers agreed to pay almost $15 million in refunds and penalties. But the damage in lost consumer confidence was extensive. By the end of 2015, about 185,000 customers had abandoned suppliers to return to their utilities. The market had peaked in March 2014, when 2.23 million had switched.

Fixed-rate contracts, which provide price stability, appear to be increasingly popular. About 1.5 million customers had fixed-term contracts of at least one year in length. In 2014, 44,000 customers had three-year contracts. In 2015, that number had grown to 336,000.

Suppliers blamed the decrease in customers on market conditions, not disillusionment.

"While the transient decline in shopping is concerning, it is not evidence of a dramatic shift in customer interest in shopping," said Bryan Lee, a spokesman for the Retail Energy Supply Association.

"Power prices have been fairly stable and historically low since the polar vortex," Lee said. "This means that utility default rates have also been relatively low, and there is less of a drive for customers to shop."

Peco, the state's largest electric company, serving 1.6 million customers in Philadelphia and surrounding counties, was the only utility to report more customers shopping now than in 2014. About 581,000 Peco customers are served by other suppliers, up from 550,000 in March 2014.

The number of customers who chose green-energy suppliers declined 13 percent in 2015, from 257,206 to 223,682. The number is still 58 percent higher than the 2013 level, and the reduction was no cause for concern for John Hanger, Gov. Wolf's former policy chief and an architect of the state's 20-year-old electric-choice act.

Hanger said the amount of renewable power generated had increased dramatically, as measured in kilowatt hours.

"The boom in green energy is deep and very, very real," he said.

amaykuth@phillynews.com

215-854-2947 @maykuth

5.6%

Decline in customers shopping for electricity from

2014 to 2015

2,045,000

Pennsylvania customers that were served by competitive suppliers

in 2015.

67%

Portion of power sold by competitive suppliers

84

Competitive suppliers that are licensed for Peco residential market

223,682

Pa. customers who chose renewable-power suppliers

SOURCE: Pennsylvania PUCEndText