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May 18, 2011
For commercial customers, Peco will raise its price to compare.
The Philadelphia utility announced Tuesday that its electricity prices for commercial customers would increase between 9.4 percent and 12.6 percent on July 1.
For small commercial customers, Peco's price to compare will increase from 9.43 cents per kilowatt hour to 10.32 cents on July 1, a 9.4 percent increase.
For medium commercial customers, the rate will increase from 9.30 cents per kWh to 10.47 cents, or 12.6 percent.
According to Peco, the average monthly usage for general-service commercial customers - the GS Rate - is 4,530 kilowatt-hours, or about $565 a month.
Peco's commodity charge, which accounts for about two-thirds of a typical customer's bill, will increase sharply to reflect the higher price of procuring power during the summer months, said Cathy Engel Menendez, the utility's spokeswoman.
The increase won't affect the 60,000 Peco small commercial customers who have switched electrical suppliers in Pennsylvania's deregulated energy markets. Peco Energy Co.'s commercial customers who have not shopped for an alternative electric supplier might want to reconsider that strategy. But nearly 100,000 shop owners, office managers, and manufacturers that have not switched from Peco might take a second look at alternatives in the face of the impending increase.
A typical small business customer will see a monthly increase of $40 on July 1.
Peco had previously announced that residential charges would be increasing by 4.3 percent on July 1. On Tuesday, Peco was more specific, saying its residential price-to-compare will increase from 9.99 cents to 10.42 cents. For consumption above 500 kilowatt-hours, the price will be 11.69 cents per kWh.
Peco says that the commodity prices are based on procurement contracts with power generators, and that the utility passes the cost along to customers without markup. The supply contracts are based upon tightly structured market-based auctions.
Peco's commodity charge for commercial and industrial customers is more dependent upon short-term spot market electricity costs than the residential rate, which is protected from volatility by more long-term power-supply deals. So the commercial price can fluctuate more dramatically each quarter.
The wholesale cost of power has always varied seasonally. But with deregulation, Peco's charges are now adjusted quarterly to reflect market conditions. Electricity tends to be more expensive in the summer, when demand is higher.
The quarterly adjustments don't affect Peco's rate, a distribution charge assessed on each customer regardless of who supplies the electrical power. The distribution charge reflects Peco's cost for maintaining its wires and customer service system, and it includes Peco's profit. That fixed rate is regulated by the Public Utility Commission.
While most suppliers advertise a uniform rate for residential customers, commercial customers have fewer guideposts. Suppliers often quote individual prices that depend upon a customer's usage patterns.
One supplier that quotes a small-commercial rate is the Energy Cooperative Association of Philadelphia, whose rate may now be more attractive in light of Peco's increase.
The Energy Coop charges 9.42 cents per kilowatt-hour for small commercial customers, a supply that includes 20 percent renewable power. When Peco's rate goes up to 10.32 cents in July, the nonprofit's price will be 8.7 percent less than the utility's. That does not include the cooperative's $30 annual fee for commercial memberships.
Jossi Fritz-Mauer, codirector of the cooperative, said customers needed to initiate the switch now in order to take advantage of the savings this summer.
"If they wait for big bills to shock them into switching, they'll miss out on a lot of savings," he said.
Pennsylvania's Public Utility Commission explains electrical choice and lists alternative suppliers at www.papowerswitch.com
The Pennsylvania Office of Consumer Advocate will mail a Peco shopping guide for free: 1-800-684-6560.
How can alternative electricity suppliers sell power below a utility's rate and still make a profit? The commodity they sell is identical - it's all the same electrons. What's the catch?
Peco Energy Co.'s 1.6 million customers can thank - or curse - the wonders of the electricity marketplace for inspiring an invasion of alternative suppliers bombarding the Philadelphia market with discount offers.
As Peco shifts into market-based rates at the end of the month, at least 17 suppliers are offering discounts of 10 percent and more to residential customers for electricity supply. Even more suppliers are targeting commercial and industrial customers.
They are able to undercut Peco's default price because they are unhindered by the one-size-fits-all pricing that Peco must offer and can more nimbly navigate electricity markets, where prices shift by the hour and the season.
"Alternative suppliers could be buying for a different profile, a smaller audience," said Cathy Engel, Peco's spokeswoman.
Under Pennsylvania's Electric Choice Act, which is being fully implemented Jan. 1 after a 14-year transition period, Peco and other traditional utility companies became solely distributors of power - "wire companies." New Jersey and Delaware have undergone similar transitions.
Though billing and customer service will still be handled by the wire companies, customers are free to choose a supplier that generates the power, which accounts for about two-thirds of a residential bill. The remainder of the bill is Peco's distribution charge.
For customers who do not want to shop, the Pennsylvania Public Utility Commission requires Peco to provide basic generation service. For residential customers, Peco's 2011 "price to compare" is 9.92 cents per kilowatt-hour. It's also called the "default rate" because that is the price customers will get if they do nothing.
Discounters are enticing residential customers with offers of about a penny less than Peco's rate, saving the typical homeowner about $90 a year.
Robert F. Powelson, a PUC commissioner from Chester County, said some customers are reluctant to switch because they are worried that utilities will lose money and punish customers who defect. But utilities such as Peco make their profits from the distribution charge, not from power generation, and Peco is telling customers it doesn't care who supplies the power.
"The wire company makes no money off default supply," Powelson said. "It's simply a safety net for those customers who are willing, in some cases, to pay a higher rate and they don't want to shop."
Peco's price-to-compare is based upon procurement contracts it obtained during four auctions conducted over the last two years. The PUC designed the auction system to avoid problems encountered during the early days of deregulation, such as in California, where energy markets were famously manipulated by traders for Enron Corp.
Peco's auction system is administered by a third party, NERA Economic Consulting GmbH. The identity of the bidders is hidden, and no single supplier is allowed to dominate the process, Engel said.
Because the default rate is based on contracts obtained in several auctions, the price is based on an average. That was a hard lesson regulators learned in Maryland, where utilities based their default rate on one post-Hurricane Katrina auction in 2005, when electricity prices spiked because of Gulf Coast natural gas shortages. Outraged utility customers nearly stormed Annapolis to demand relief.
But auctions for default supply do not necessarily generate the lowest price. Because power suppliers cannot be sure how many utility customers will want the default supply, their bids incorporate a "risk premium" to protect them against the uncertainty about how much electricity they will need to supply.
That is where alternative suppliers have an advantage. They can predict their customers' consumption based on historical patterns and can buy futures contracts at lower prices to match demand.
"Competitive suppliers don't have to 'time-average' their electricity purchases," said George C. Lewis, spokesman for PPL Electric Utilities Corp., the Allentown company where 35 percent of its customers have switched to alternative suppliers since market rates arrived Jan. 1.
Advocates of deregulation say Pennsylvania customers have already benefited from competition, regardless of whether they switch.
Under the state's old system, customers assumed the risk for the cost of building power plants, and the vertically integrated utilities were guaranteed to earn a profit, whether the plants were efficient or not.
Powelson, the PUC commissioner, said the high cost of building the Limerick nuclear reactors in Montgomery County - which drove up Peco's rates for a generation - was "really the poster child for why we did electric deregulation."
In a market-based system, investors assume the risk for power-plant construction. Plants run more efficiently or are retired, Powelson said.
The result in Pennsylvania is that statewide electrical rates, when adjusted for inflation, have fallen since the legislature enacted Electric Choice in 1996.
According to the PUC, a residential Peco customer using 500 kilowatt-hours paid $81.53 a month in 2010, 16 percent more than a comparable 1996 bill. But, adjusted for inflation, the monthly Peco bill is 17 percent less now than it was in 1996.
The effect of competition among the alternative energy suppliers is already taking place in the Peco market.
A month ago, Texas supplier Spark Energy L.P. came out with a fixed-price offer of 8.93 cents, 10 percent below Peco's 2011 price-to-compare. The offer included a requirement that customers pay a $100 penalty if they switched during the one-year contract, a fee designed to compensate Spark if it got stuck with power it was committed to buy on the customers' behalf.
Several other suppliers have since made fixed-rate offers that do not include a cancellation fee, and Spark last week said it was dropping the penalty because it was a barrier to sales - Pennsylvanians are not accustomed to cancellation fees from electric utilities.
"This whole competition process is very dynamic," said Hal Poel, Spark's marketing director. "Competitors react to each other. That's really to the benefit of customers over the long run."
Pennsylvania's Public Utility Commission explains electrical choice and lists alternative suppliers at http://www.papowerswitch.com
PUC offers a primer on understanding your Peco electric bill at http://go.philly.com/pecobill
Peco Energy Co. responds to customer questions at http://www.pecoanswers.com
Pennsylvania Office of Consumer Advocate will provide a list of suppliers to those without computer access: 1-717-783-5048.Ads by Google
Since electric competition took off on Jan. 1 in Peco Energy Co. territory, more than 260,000 customers have switched suppliers, according to the utility.
About 16 percent of Peco's 1.6 million customers, including most of its large industrial customers, have switched to alternative suppliers, according to Cathy Engel Menendez, spokeswoman for the Philadelphia utility.
Nearly half the power distributed through Peco's system is now supplied by alternative suppliers, she said.
Competition has taken off more quickly than anticipated. Nearly 50 suppliers serve Peco customers, including 36 that target residential customers. Some are offering discounts of 10 percent or more, saving a typical residential customer $90 a year.
Under the state's electric choice law, customers have the option to buy the electricity from a competitive supplier. For customers who don't shop, Peco purchases electricity and passes it along without markup.
"This is a win-win for our customers," Denis O'Brien, Peco's president, said in a statement. Peco remains the distribution company for all customers and collects a fee regardless of whom customers choose as their supplier.
In the new environment, Peco's default rate for customers who do not shop is adjusted every three months to reflect market conditions.
The default rate - also called the price to compare - will increase slightly on Friday from 9.92 cents per kilowatt hour to 9.99 cents.
Customers who switch could save even more this summer, said Irwin A. "Sonny" Popowsky, the state's consumer advocate.
Under Peco's tariff, residential customers in June will pay 11.2 cents per kilowatt hour for monthly usage exceeding 500 kilowatt hours - that applies to most customers with central air-conditioning. Customers who sign up with alternative suppliers do not pay the surcharge.
Most customers opting to stick with Peco - forgoing discounts
Spring is in the air. Temperatures are rising. And so are Philadelphia electricity rates.
Peco Energy Co., which now adjusts its electricity rates quarterly in the newly deregulated power market, says its residential price-to-compare will go up about 4 percent July 1, from 9.99 cents per kilowatt-hour to 10.4 cents.
Alternative electric suppliers, which have signed up 18 percent of Peco's 1.6 million customers since market rates took effect Jan. 1, are also boosting the prices of their offers to reflect the wholesale cost for power, which typically increases during the summer when there is more demand.
But alternative suppliers are still offering fixed-rate deals more than 10 percent below Peco's default rate. The default rate is the amount charged to customers who don't switch.
And Peco's power-hungry residential customers - those with central air conditioners - could reap savings of more than 20 percent by switching to avoid a Peco summer surcharge on excess consumption. The extra charge does not apply to alternative suppliers.
"There really are benefits for Peco customers to shop before the summer begins," said Irwin A. "Sonny" Popowsky, Pennsylvania's consumer advocate.
Despite the discounts and a relentless education campaign by the Pennsylvania Public Utilities Commission, most residential customers have stayed put.
Robert F. Powelson, who was appointed by Gov. Corbett to be chairman of the PUC, says many customers are reluctant to switch because they mistakenly believe Peco will lose business and will punish customers who leave.
"You're just picking the commodity piece of your bill," Powelson said. "Peco is agnostic about where you get your power. They don't care. So go out there and save money."
Under the state's Electric Choice Act, the power industry was broken into two parts - companies that generate electricity and "wires companies" such as Peco that distribute power on their networks of wires. After more than a decade of transition, the law went into full effect Jan. 1 for Peco customers.
Customers are free to shop around for a supplier. But under the law, the traditional utilities are required to supply power to customers who don't shop.
By law, utilities have to buy the default power supply at the lowest cost. And they're not allowed to make a profit on it - the cost is passed along to customers without markup. That's the default rate, also known as the price to compare.
Peco still earns a profit on every customer connected to its system, regardless of who supplies the power. Peco collects a distribution charge for every kilowatt-hour it delivers. That charge is regulated by the PUC, and it includes Peco's profit.
Peco says 38 alternative suppliers are now active in the residential marketplace, though only 26 have posted their offers with the PUC and the Office of the Consumer Advocate.
One of latest entries to the residential market is PPL Energy Plus, the retail-marketing arm of PPL Corp., of Allentown. PPL Energy Plus had been active in the market for industrial and commercial customers and is now targeting residential customers.
There are a variety of offers facing customers who want to shop. Some rates vary from month to month, putting the customers at the mercy of the markets. Others are fixed for terms ranging from six months to several years. Some companies charge cancellation fees.
Many are marketing "green" options that derive their electricity partly or entirely from renewable power sources.
A typical residential customer who uses 750 kilowatt-hours a month might save $90 a year by switching. But intrepid shoppers - and those who consume lots of power - can find even better deals.
BlueStar Energy Solutions is one of the companies still offering a one-year fixed-rate price below 9 cents a kilowatt-hour - at 8.89 cents, it's nearly 15 percent less than Peco's estimated default rate after July 1. But customers who cancel early will face a penalty charge.
Direct Energy offers a fixed rate of 9.42 cents per kilowatt-hour, the same amount it charged a few months ago. Yet it has lowered its online discount offer to seniors and military personnel from 9.22 cents to 8.79 cents.
Spark Energy recently increased its fixed-rate offer from 8.93 cents to 9.59 cents per kilowatt-hour. But a group reseller, AlphaBuyer, is offering a limited-time online deal with Spark at 8.79 cents per kilowatt-hour - the same company, but at 8 percent less.
The comparison shopping gets even more complicated for some customers who use a lot of power in the summer, because Peco charges a higher rate on excess use from June through September.
The higher charge, which regulators call the inverted block rate, will be phased out by 2013 as the PUC requires Peco to simplify its default rate. But this summer, Peco estimates the charge will amount to 11.66 cents per kilowatt-hour for consumption above 500 kilowatt-hours - that's 25 percent more than some of the best current fixed-rate offers from alternative suppliers, who don't charge a higher rate.
How does that add up?
A customer who uses 1,500 kilowatt-hours a month in the summer who locked in with an alternative supplier at 8.89 cents per kilowatt-hour will pay $35 a month less than a customer who remains on Peco's default rate. That's a 21 percent savings on the commodity part of the bill.
"That rate differential kicks in, and if you have air-conditioning and you're using more than 500 kilowatt-hours a month," said Popowsky, the consumer advocate, "there's some real savings to be had."
The PECO Energy utility area has multiple retail electricity suppliers available to compete and win your electric usage for home or business.
Below is a list of PECO Energy Competitive Retail Electricity Suppliers (Electric Generation Suppliers).
Affiliated Power Purchasers, Inc. (APPI)
224 Phillip Morris Drive Ste. 402
Salisbury, MD 21804
Allegheny Energy Supply Company LLC
800 Cabin Hill Drive
Greensburg, PA 15601
Constellation NewEnergy Inc.
100 Constellation Way
Baltimore, MD 21202
Commerce Energy, Inc.
600 Anton Blvd.
Costa Mesa, CA 92626
Residential: 877-524-7283 Commerical: 800-977-0500
341 White Pond Drive B3
Akron, OH 44320
OnDemand Energy Solutions
300 Corporate Drive, Suite 130 P.O. Box 869
Moon Township, PA 15108
Pepco Energy Services Electric Supplier
1300 North 17th Street, Ste. 1600
Arlington, VA 22209
PPL EnergyPlus, LLC
P.O. Box 25225
Lehigh Valley, PA 18002
Richardsí Energy Group
3901 Nolt Road-Bldg #1
Landisville, PA 17538
Select Energy, Inc.
107 Selden Street
Berlin, CT 06037
Direct Energy Electric Company
1001 Liberty Avenue
Pittsburgh, PA 15222
The Energy Cooperative Association of PA
1218 Chestnut Street, Suite 1003
Philadelphia, PA 19107
GDF SUEZ Energy Resources Electric Company
(866) 999-8374 (Toll Free)
1990 Post Oak Boulevard, Suite 1900
Houston, TX 77056
UGI Energy Services, Inc.
610-373-7999 / 800-427-8545
1 Meridian Boulevard
Wyomissing, PA 19610
325 West Road
Portsmouth, NH 03801
(800) 437-7872 (a.k.a. 800-HESS-USA)
One Hess Plaza
Woodbridge, NJ 07095
Premier Power Solutions LLC
107 Breckenridge Street
Grove City, PA 16127
Sempra Energy Solutions LLC Electric Provider
401 West A Street
San Diego, CA 92101
Exelon Energy Company
300 Exelon way
Kennett Square, PA 19348
Taylor Consulting and Contracting LLC
570-414-0880 or 877-237-9936; Fax 570-414-0884
625 Main Street
Avoca, PA 18641
Dominion Retail Inc. Electricity Supplier
P. O. Box 298
Pittsburgh, PA 15230-0298
Champion Energy Services LLC Electricity Company
13831 NW Freeway
Houston, Texas 77040
Gexa Energy Pennsylvania LLC Electric Company
20 Greenway Plaza, Suite 600
Houston, TX 77046
3020 Penn Avenue
West Lawn, PA 19609
Commercial Utility Consultants Inc.
1556 McDaniel Drive
West Chester, PA 19380
Chrislynn Energy Services Inc.
301 Applridge Court
Gibsonia, PA 15044
Energy Choice Solutions Electricity Supplier
913 Shenandoah Lane
West Chester, PA 19380
HRNEnergy Electricity Supplier
201 Columbia Turnpike
Florham Park, NJ 07932
Utility Rates Analysts
220 South 17th Street
Camp Hill, PA 17011
Palmco Power PA LLC Electric Company
1350 60 Street
Brooklyn, NY 11219
Secure Energy Solutions Electric Supplier
12 Somers Road
East Longmeadow, MA 01028
Paragon Advisors LLC-Energy Management Solutions Electric Company
170 Boston Post Road
Madison, CT 06443
Energy Management Resources (EMR) Electricity Supplier
1536 NE 96th Street
Liberty, MO 64068
Northeast Energy Partners LLC Electricity Provider
174 South Road
Enfield, CT 06082
The following information is from PAPowerChoice.com
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