Benefits of shopping for power.

The Hill School's annual electric bill is about $425,000. So officials at the renowned Pottstown boarding school were preparing for the worst when Peco Energy Co. transitions to market rates next year.

"Like everyone, we were expecting to see our rates jump 15 to 20 percent come Jan. 1, 2011," said Don Silverson, the school's treasurer.

Silverson hired a broker to find an electrical supplier and deliver what he thought was going to be bad news. But in April, three suppliers tried to outbid one another to get Hill's business.

The offers came in below the school's current costs.

"We're anticipating our savings will be about 12 to 15 percent off what we're using now, which is surprising, since we were told six months ago that rates were going through the roof," said Silverson. The school locked into a three-year contract that will yield expected annual savings of $50,000.

The Hill School's experience may not be typical - its power consumption declines in the summer, when rates are highest - but suppliers vying to sign up Peco's largest customers say that the new competitive electrical market may not be as much of a shock when it hits Jan. 1 as was once expected.

"Most folks are still going to have an increase, but we're not seeing the 20 to 30 percent increases that many feared," said Kenneth Antos, marketing vice president at World Energy Solutions Inc., a Massachusetts broker that ran the online auction for the Hill School.

The event triggering the frenetic scramble to link customers with suppliers is the scheduled end of rate caps Jan. 1.

Under the state's Electricity Generation Choice and Competition Act, signed in 1996, utilities became strictly power-distribution companies, not suppliers. Their rates were capped at 1996 levels to allow them to ease the transition to competitive markets.

When the rate caps expire next year, Peco will continue to receive a distribution charge from all customers, to pay for the maintenance of wires, billing, and customer service. That fee will continue to be regulated by the Pennsylvania Public Utility Commission.

But the larger part of the electrical bill will come from the rate supplier's charge for power generation. Customers can now choose their supplier, but customers who do not want to shop around can stay with Peco's "default rate."