Discount power suppliers target N.J.

When market prices are trending upward, the default rate partly reflects lower-priced contracts from previous years, so it is hard for alternative suppliers to compete. The exception: suppliers that provide renewable-energy options, which is not a price-sensitive market. The utilities regulator in New Jersey says that 11,000 residential customers have opted for clean-energy suppliers.

"The economics haven't worked," said Stefanie A. Brand, the New Jersey public advocate.

But in an environment with falling prices - such as the last two years - the economics are turned around. Now the utilities' default rates are less competitive because they are partly based on supply contracts from previous years, which are costly compared with current market prices.

Enter the alternative suppliers, such as Constellation Energy, which are seizing an opportunity.

Constellation is among a legion of power suppliers that work in deregulated markets. Most suppliers focus on serving commercial and industrial customers because they can make a profit on even slim wholesale margins, because the volume of electricity the customers buy is so large.

But residential electric markets have proved to be less attractive. The profit margins per kilowatt-hour need to be sufficiently large to cover the marketing costs to build up a brand and acquire individual customers.

That is what is happening now in New Jersey - and what happened in PPL territory in Pennsylvania. Alternative suppliers are able to save residential customers a penny or more per kilowatt-hour - about $10 a month.

Pennsylvania utilities have found that the monthly savings are often insufficient to induce most residential customers to switch. Many are wary of the alternative suppliers, though the traditional utility remains the point of contact for customer service and billing issues.

Consumer advocates caution customers to closely read the contract terms offered by energy suppliers. Some rates are fixed, some are variable. Suppliers often demand cancellation fees.

"They should ask a lot of questions," said Brand, the New Jersey public advocate. "They need to approach this as they would any major decision."

Power Shopping

Check these websites on choosing a residential electricity supplier.

Pennsylvania customers: www.papowerswitch.com

New Jersey Board of Public Utilities: www.bpu.state.nj.us/bpu/assistance/utility/#3

PSE&G customers: www.pseg.com/home/customer_service/energy_choice/index.jsp

Atlantic City Electric customers: www.atlanticcityelectric.com/home/choice/nj