Fewer Pa. customers are changing electricity suppliers

Posted: October 24, 2013

After two years of initial robust growth, Pennsylvania utilities this year are experiencing a substantial slowdown in customers switching electricity suppliers.

More than two million Pennsylvania electric customers - about 35 percent of the total - switched suppliers by February. Since then, the growth has slowed, and only about 100,000 more customers have signed up with discounters.

More Peco Energy Co. customers returned to the utility this summer because Peco's default price was better than that charged by many competitive suppliers. Five thousand fewer Peco customers get their electricity from competitive suppliers now than on June 4.

"You look at the numbers, and the numbers tell the story," Robert F. Powelson, chairman of the Public Utility Commission, said Tuesday. "The concern that I have is that only 33 percent of the Peco residential customers have left the mother ship and have gone out to shop."

Powelson said utilities were partly to blame for the "shopping stagnation" because they were not promoting Electric Choice aggressively enough to their customers. He said utility education efforts were "a little bit anemic."

Experts said some customers found the competitive marketplace confusing - 75 suppliers are listed on the PUC's website for Peco residential customers, including several that offer fixed-rate prices up to 16 percent lower than Peco's rate.

But many customers soured on shopping after they signed up with competitive suppliers at discounted rates only to discover the suppliers quietly boosted the prices after the terms of their agreement ended.

"You can't just switch and not pay attention to it," said Ray Landis, the AARP's advocacy representative in Pennsylvania.

Pennsylvania's electric-competition law is structured to allow customers to choose a company that supplies the electricity. The customers are still captives of utilities such as Peco, which deliver the power of their wires, but the law gives consumers some choice over the costliest part of their bill - the generation charge.

Utilities are required to supply power to those customers who don't want to shop at cost. The price they charge is called the default rate, and they are not allowed to make a profit on it. Even so, many suppliers have been able to beat it by 10 percent or more.

Peco's default rate has been particularly volatile. Following PUC rules, Peco adjusts its rate quarterly to reflect changes in market prices for electricity, but also to reconcile collections from the previous quarter. If Peco charged too much the previous term, it is required to lower its price the next quarter. If it guessed too low and charged too little, it raises prices to make up the difference.

The result is a roller-coaster default rate that can confuse customers.

In June, Peco dropped its default rate from 9.61 cents per kilowatt hour to 8.61 cents, below the price offered by many competitive suppliers. On Sept. 1, Peco adjusted its rate up 8.6 percent, to 9.35 cents per kilowatt hour. On Dec. 1, Peco's price is set to go up 4 percent more, to 9.72 cents.

"People get frustrated and say my supplier is taking advantage of me, and they go back to Peco," said John Raisch, cofounder of Alphabuyer.com, a Paoli broker that markets power to residential customers. Raisch said that despite the volatile Peco price, his company had been able to save the average customer about $180 a year.

The PUC in February recommended changing the way distribution companies such as Peco buy their power to reflect current market conditions and to reduce volatility.

The PUC also ordered utilities to devise programs to steer customers to competitive suppliers.

Under Peco's program, which it calls Smart Energy Choice, customers not now enrolled with competitive suppliers are encouraged to sign up with nine suppliers who have agreed to supply power at 7 percent less than Peco's current price.

Cathy Engel Menendez said 6,000 customers had been referred to new suppliers since the program started Sept. 1.

But the new enrollment has barely offset the loss of other discontented customers who have returned to Peco in the last two months. According to the PUC, competitive suppliers have experienced a net gain of only 1,000 Peco customers since the end of August.

Power Shopping

Pennsylvania's Public Utility Commission explains electrical choice and lists alternative suppliers at http://www.papowerswitch.com.

The Pennsylvania Office of Consumer Advocate will mail a free Peco shopping guide: 1-800-684-6560.


215-854-2947 @maykuth

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