The Penelec deregulation story began nearly 15 years ago when rate caps were put in by the legislature. The law allowed Pennsylvania’s local electric distribution utility (LEU) to be an “default” provider for a minimum of three years. It also set a real rate cap to ensure that residential customers are not being impacted by market prices during the transition period.
In late 2000 more than 500,000 residential customers qualified for default service rates. The new rates weren’t added to customer bills until February 2001. When the new Default Service rates were implemented they were significantly higher than Standard Offer Service (SOS) rates. At Fitchburg Gas and Electric, the rates are currently higher than 8 cents per kWh.
Customers who had service from a competitor provider previously may apply for default service. These customers can choose to switch back to regulated service. This service is supervised by the state commission in Pennsylvania. Customers can also select Competitive Default Service. During the transition period from 2000 to 2003, the price of this service has to be below the market price for electricity.
PECO Energy was one of the first utilities to establish the Default Service program in Pennsylvania. They signed a contract with an outside company to provide default service to 20 percent of their residential customers. PECO Energy was able, without significant investment to acquire an existing supplier through an auction process.
PennFuture estimates that consumers have saved more than $2.84 billion on electricity bills since 1997. In comparison to other states, Pennsylvania has the highest rate of retail customer shopping for residential customers. There are also a variety of universal service programs available in Pennsylvania that include energy conservation and bill payment assistance.
Residential customers in Pennsylvania have two different rate caps. There is a rate limit for the distribution portion of a customer’s bill, and a different rate limit for the generation portion. Because of the two rate caps, consumers are able to look around for a competitive rate. The rate cap protects customers who choose to switch to a rival supplier.
As the demand for power continues to increase in Pennsylvania, the wholesale market is volatile. The price of power is expected to decrease over the next few months. This could result in more legislative questions from state legislators about retail competition. Some states, such as Connecticut have established firm rates for generation.
Many other states have enacted new programs specifically for people with low incomes. Some providers offer discounts to veterans, frequent flyer points, and sign up bonuses. Still, most states have not yet embraced full-scale retail competition. The majority of states have targeted their poorer populations through bill assistance for payment and energy conservation programs, as well as services for those with low incomes.
The state legislature also approved the state DWR’s ability to sell power to retail customers. The state DWR is required to use utilities to bill and collect as well as to purchase and sell power to customers.