The discounted rates, which were established decades ago to encourage customers to switch to electric heating, will be cut by half Jan. 1 and eliminated by the end of 2012.
The Inquirer reported in November that the discounts would be phased out, but Peco delayed formally notifying customers to reduce confusion amid the tumultuous introduction of retail market rates this year.
Since Jan. 1, dozens of alternative suppliers have launched campaigns to supply discounted power to Peco customers. Under deregulation, Peco continues to distribute power over its wires, but customers are free to shop around for a power provider.
For customers who don't switch, Peco provides power at a default rate. But to make the default rate equitable, the Pennsylvania Public Utility Commission ordered Peco to end the discounts, which are effectively subsidized by other ratepayers.
"This isn't a Peco mandate to eliminate these rates," Armstrong said. "It's something that's required of us."
About 141,000 residential customers get the heating rate, called RH, which provides a discount of about 45 percent for consumption in excess of 600 kilowatt hours during the winter months. Peco said the discount saves a typical RH customer about 5 percent a year.
About 65,000 customers receive the off-peak rate, which provides a 70 percent discount for power consumed by a water heater that is connected to a separate meter that cuts off electricity during peak hours.
An additional 9,000 customers get both the heating rate and the off-peak rate.
In a letter to customers, Peco vice president Mark Alden says the utility has programs to help them reduce costs. The utility also plans to introduce time-of-use rates next year, which reward customers for shifting consumption to off-peak hours.
Peco says it expects alternative suppliers will also make competitive offers to heating customers next year as the discounted rates disappear.
In the current market, alternative suppliers are unable to compete for customers who get the discounted rates because none can match Peco's below-market rates.
Low-income customers who are signed up for the discounted Customer Assistance Program also have no reason to shop around because they would lose the discounts if they switched. The CAP program, which is mandated by the state, remains in place.
Peco has 1.6 million customers. About 300,000 have switched to alternative suppliers since Jan. 1.
Customers can contact Peco at www.pecoanswers.com or 1-800-494-4000.
Contact staff writer Andrew Maykuth at 215-854-2947 or email@example.com.