Customers must decide: Keep PECO, or try another outlet?

Posted: December 14, 2010

HERE WE GO again.

It was roughly a decade ago that Philadelphia-area electric customers were told about a bold, new era of choosing their own utility - with a goal of lower bills, cleaner energy or both - only to see that initial push collapse in the wake of the Enron scandal and rising energy costs.

But starting in just 17 days, a new era of electricity choice begins in Philadelphia and its Pennsylvania suburbs, and this time real deregulation is expected to stick. That means savvy customers can save as much as $75 to $90 a year.

"Pennsylvania is one of the most successful states," said Elizabeth Stelle of the conservative Commonwealth Foundation, which has monitored the slow rollout of electricity choice in other regions of the Keystone State. "We have more people switching or using alternative pricing here than any other state except for Texas."

But with electricity deregulation about to take root in the city and region, most local residents still have more questions than answers. The Daily News is here to help.

Q. Why is this all happening now?

A. Pennsylvania passed a bill deregulating the electricity market way back in 1996, when consumers here paid on average about 15 percent more than the national average. The Electricity Generation and Customer Choice and Competition Act meant that while the traditional monopoly utilities - that would be Peco for 1.6 million customers in the Philadelphia region - would still deliver your electricity, consumers could shop for a power generator.

But several factors rendered deregulation all but moot for more than a decade. The state and the utilities made a deal that allowed the companies to charge a fixed fee to recover their so-called stranded costs - bad investments in things like nuclear power plants - in return for a cap on regular kilowatt-hour rates that kept these low. Most Pennsylvanians pay less in inflation-adjusted dollars for their electricity now than in the 1990s.

The rate caps have been gradually lifted, with Peco customers in the final group on Jan. 1. That - coupled with the recession, which has lowered costs for electricity generators - has brought real competition, with at least 17 companies now poised to enter the Philadelphia market.

Q. Can I just stay with Peco, and what will happen if I do?

A. Yes, and if Philadelphia is like other parts of the state, thousands of residents will do exactly that. Peco announced recently that for the first quarter of 2011, its base rate - which regulators call the "price to compare" - will be 9.92 cents per kilowatt hour, which is a roughly 5 percent increase over the current rate.

Q. So what's my incentive to switch?

A. Many of the power generators entering the market are offering rates as much as 10 percent lower than Peco's, which could mean annual savings of an estimated $75 to $90 a year, or even more if you are a heavy electricity user.

The reason for the discounts is that although Peco's "price to compare" is based, by law, on a complex series of auction prices, its rivals can offer rates that are based on immediate market conditions and are more flexible.

Q. OK, so how do I switch?

A. One way is to shop around, a task that's relatively easy over the Internet. (See related box for details of comparison websites.)

In all likelihood, though, expect at least some of Peco's competitors to contact you - perhaps through telemarketers or even through door-to-door salesmen - and try to sign you up. If you are thinking of switching, there's no deadline to decide.

Q. What happens if I switch electricity generators and there's a power outage?

A. You'll contact Peco - just as you would have before. Peco will also still send out and collect your monthly bill.

"And all of our Peco Smart Ideas - ways for customers to use less energy - they can still take advantage of all of those programs," said Cathy Engel, the utility's spokeswoman.

Q. What do I need to look out for in shopping for a new power provider?

A. Most experts point to a couple of pitfalls. Explained Heather Yoder of the state Office of Consumer Advocate: "They need to understand whether the plan is fixed or variable, and whether it has a cancellation fee."

A variable rate may rise or fall with the seasonal or commodity pricing of energy - and experts note that consumers need to understand how often their rate would change. Typically, variable rates increase along with the temperature outside, since heavier electricity use in the summer means that more expensive generating plants are needed.

Also, some of the electricity providers charge a cancellation fee if you decide to switch to another company, or back to Peco. The companies say that's necessary because their generating costs are based on getting a firm handle on exactly how many customers they'll have. Cancellation costs could run as high as $100.

Q. I'm a big believer in alternative, or "green," energy, and I'd be willing to pay more for that.

A. You can. For example, Peco Wind gives you an opportunity to buy some or even all of your energy at a rate of an additional 2.54 cents per kilowatt hour to pay for wind generation. Another provider, the Energy Cooperative, offers two options with increased alternative power.

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