Extreme cold in January could shock some energy customers

Jan. 21 at 10th and Lombard Sts. PJM described last month's power demand as the highest in its 87-year history.
Jan. 21 at 10th and Lombard Sts. PJM described last month's power demand as the highest in its 87-year history. (YONG KIM / Staff Photographer)
Posted: February 05, 2014

Some retail electricity customers might suffer frostbite from January's wintry weather.

Customers in Pennsylvania and New Jersey who signed up for variable electricity rates from competitive suppliers may see a serious spike in their bills because of crazy swings last month in the wholesale power markets.

The average hourly spot-market price of electricity on the regional power grid was three times as expensive in January as it was a year ago, according to an analysis of prices posted by the grid operator, PJM Interconnection Inc.

Though the spot-market prices affect only a small portion of power not sold under long-term contracts, the spikes might have a disproportionate effect on customers who are not protected by fixed-rate plans, but who get market-rate prices that vary month to month.

"The extreme cold weather is causing massive raw PJM price increases and, from what my network says, will have some big impacts on the market," said John Raisch, a cofounder of the Paoli power broker Alphabuyer.com.

Many customers who initially signed up for fixed-rate plans failed to renew their contracts when the terms ended and were switched to variable-rate plans, said Raisch.

On Friday, the Pennsylvania Public Utility Commission warned customers to review their contracts. Many variable-rate plans do not contain price ceilings.

How many retail customers are on variable rates is unknown. About 34 percent of Peco customers and 47.5 percent of PPL Electric Utilities customers have switched to competitive suppliers. New Jersey electric customers also are eligible to sign up with third-party power suppliers.

Suppliers that are unable to pass along the high wholesale cost of electricity are also at risk.

Clean Currents Benefits L.L.C., a Silver Spring, Md., supplier that specializes in renewable power, last week became the first marketer to default since Pennsylvania retail markets became fully competitive in 2011, according to the PUC.

Most Clean Currents customers were on fixed-rate contracts, but Gary Skulnik, the company's chief executive, said its long-term contracts were insufficient to cover its obligations.

"We were not sufficiently hedged," Skulnik said Friday. "When the wholesale market started going through the roof, we weren't able to cover it."

The company had 6,000 residential customers and 2,000 commercial customers in Maryland; Washington, D.C.; and Pennsylvania. The Pennsylvania customers returned to their utilities, and their power supply was not disrupted.

Skulnik, 45, a former Sierra Club and Greenpeace activist, created the company in 2004 as a way to promote renewable energy. He said its failure had nothing to do with green energy, but with spot-market prices that on the coldest day last month averaged 60 cents a kilowatt hour - 20 times a typical wholesale cost.

"I haven't seen anything remotely like this, not even in the summer," said Skulnik, adding that he was uncertain of the total losses.

"We're still trying to do the autopsy," he said.

Power suppliers must provide bonds, or insurance, to pay for any shortages. If PJM is still owed for losses, the grid operator can recover the amount through an assessment on other members, said Ray Dotter, a PJM spokesman. Those assessments typically would be passed down to customers.

PJM, which oversees power markets in parts of 13 states and the District of Columbia, described last month's power demand as the highest in its 87-year history. Eight of its 10 highest days for winter demands occurred last month.

See the PUC's suppliers list at http://www.papowerswitch.com. The Pennsylvania Consumer Advocate provides shopping guides for free; call 1-800-684-6560.


215-854-2947 @Maykuth

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