PECO Energy was the last utility area in Pennsylvania to begin full electricity competition. On January 1, 2011 PECO Energy customers saw rate caps lifted as electric choice began. Now PECO electricity customers have access to over a dozen competitive electric suppliers, offering a variety of rate products (fixed, variable, green energy) and sign up promotions.
One of the biggest issues holding back customers from shopping for electricity rates is customer loyalty to PECO Energy. The thing that people need to understand is that if you are a PECO customer, you will continue to be a PECO customer even after you choose an alternative electricity company to supply your power.
The Pennsylvania Electricity Generation Customer Choice and Competition Act redefines the roll PECO Energy and other Pennsylvania electric utilities (PPL, Penelec, Met-ED, Duquesne, etc.). Prior to electricity competition, these electric utilities were responsible for all aspects of electricity generation and delivery. Now the utility companies like PECO are responsible for the delivery of electricity to homes and businesses, but are not in the business of generation electricity or offering competitive supply rates.
The Pennsylvania electricity choice act requires PECO to offer a electricity default rate to their customers who do not choose a competitive electricity supplier. These default rates change every three months and are at risk of drastic increases that can be caused by volatile energy markets. The default rates are determined by auctions held at the wholesale level and are passed onto the PECO customer with no mark up from PECO. PECO Energy does not profit off of there customers on electricity supply default rates. PECO executives have publicly been encouraging there customers to shop for competitive electricity rates.
The electric suppliers who bid for PECO energy default customers have to charge a premium for the electricity to make up the risk of losing customers during the three month period. For example, if they bid to serve 100,000 PECO customers and win, they have to weigh into the price the probability that during the 3 months 20,000 of these customers might choose a competitive electric supplier.
Competitive electric suppliers can provide custom rates for businesses and residential customers. Also, PECO customers have the flexibility to take advantage of low energy prices and lock in rates for longer terms than three months. Because electric choice is still new to the PECO area and energy prices have been fairly low in 2011, most people living in Philadelphia and the surrounding areas are unfamiliar with just how volatile energy prices can become. PECO Energy customers are urged to shop and lock in rates to protect themselves from potential rate spikes. To illustrated energy volatility, many Texas energy customers saw their electric bills triple in the summer of 2008 due to drastically rising natural gas prices. Texas electricity has been deregulated since 2002.
While the short term savings versus PECO default rates might be low, the long term savings potential are huge when you take the time to look at historic energy pricing graphs. Since electricity and natural gas prices spiked to all time highs in 2008 they have come back to acceptable and even low levels in 2009, 2010, and early 2011. However it is just a matter of time before energy prices start to creep up. The Pennsylvania commercial electricity market has seen a quicker acceptance of choice as close to half of the businesses in the PPL territory switched suppliers at the 15 month post rate cap expiration date.