Questions and answers on electricity rate-cap end

By Jeff Gelles, Inquirer Staff Writer

Posted: January 03, 2011

New Year's Day 2011 wasn't just a day for Philadelphians to celebrate mirth and mummery. It was also a day when many in the region - Peco Energy Co.'s 1.6 million Southeastern Pennsylvania customers - faced the end of rate caps that kept power prices remarkably steady for more than a dozen years.

Before Pennsylvania decided in the 1990s to restructure its electricity markets, residents and businesses could buy power only from their local utility, and had to pay whatever state regulators decreed. The state's aim was to open its power markets to retail competition by allowing customers to buy electricity from third-party providers, leaving utilities such as Peco in charge of poles, wires, and power delivery.

For more than a decade, Peco customers have been eligible to shop for power. But thanks to the rate caps and other terms of a 1998 settlement between Peco and the Public Utility Commission, Peco's 1.3 million residential customers in particular have had little incentive to do so.

The end of the rate caps changes the equation - a change reflected in a flurry of recent marketing by more than 15 competitive suppliers.

Here are answers to some questions you might consider as you decide whether to switch:

Do I have to do anything? Not really. If you don't choose a competitive supplier, you'll remain a customer of Peco's "default service," and pay its "price to compare" for your power - 9.92 cents per kilowatt-hour through March 31.

What happens then? Peco's "price to compare" will be adjusted quarterly based on its power purchases on default customers' behalf.

Why should I consider changing? If you do nothing, your monthly bill will rise about 5 percent because of increases in Peco's delivery charges. Right now, some competitive suppliers offer fixed prices for a year that will save you more than a penny per kilowatt-hour off Peco's current price - enough to offset that increase and, perhaps save you more if Peco's price rises in April, July, or October. Of course, Peco's price could also drop, but at least you'd have a firm price for the year.

How much is a penny in savings worth? Check your bill. The median Peco customer uses about 9,000 kilowatt-hours per year, so such a customer could save about $90. Higher-usage customers would save proportionately more - though, for now, no competitive supplier is offering a deal as attractive to electric-heat customers, who get Peco's special "RH" discount.

Are there other reasons to switch? Some suppliers are offering 100 percent renewable power at a fixed price below Peco's price to compare, so you can support green energy without paying extra.

What are the pitfalls? Cancellation fees are one potential drawback, though not a huge one if you're signing up for a good fixed price. Variable rates could start out saving you more, but the benefits could vanish if prices spike. Watch out for fixed rates that expire in the summer, requiring you to shop again when prices hit annual hot-weather peaks.