In the late 1990s, Pennsylvania's electricity rates were 15% above the national average, despite the abundance of low-cost coal generation in the Commonwealth, and electricity was sold by a monopoly utility provider per designated region. Then federal regulations changed to allow electricity markets to develop. The PA General Assembly responded with the Electricity Generation Customer Choice and Competition Act, signed in December 1996, allowing consumer choice and generation competition.
Fearful of price gouging and initial market fluctuations, legislators tweaked the bill to place rate caps on utilities, which are now expiring. On December 31, 2010 the last of the rate caps will expire, allowing all consumers to have a choice and, thus, greater control over their electric bill.
Consumers are now free to leave a generation supplier, and they can customize their energy use with green options and programs that reward users for using power when demand is low. None of this was possible under the old monopoly system.
Electricity Choice Questions & Answers
When will rate caps expire? Pennsylvania is divided into 11 distribution territories. As of January 1, 2010, rate caps have expired in all but four territories: Metropolitan Edison, PECO Energy, Allegheny Power, and Pennsylvania Electric. Their caps will expire on December 31, 2010.
Is rate cap expiration good? Consumers now have a choice and, thus, greater control over their electric bill. Consumers can leave a generation supplier if they experience bad service or rates change, and they can customize their energy use with green options and programs that reward users for using power when demand is low. None of this was possible under the old monopoly system. In the long-run, it is likely rates will fall, as companies continue to compete for customers.
Why are my rates increasing? Electricity rates are increasing for several reasons. First, capped rates are being adjusted for inflation. Pennsylvanians were paying 12% less for their electricity in 2008 than they were in 1996.
Second, rising manufacturing costs have made the process of generating electricity more expensive. For example, the cost of fuel rose rapidly from 1999 to 2008 (coal and natural gas increased by 200% and 300%, respectively).
How do I shop?
1. Calculate how much you pay for electricity by finding your price to compare. You can also view regularly updated prices to compare at the Pennsylvania Office of the Consumer Advocate website: http://www.oca.state.pa.us/Industry/Electric/elecomp/ElectricGuides.htm.
2. Shop alternative suppliers in your region at: http://www.papowerswitch.com/shop-for-electricity/.
3. Contact the alternative supplier that best meets your needs. You can do this online in most cases, or call the generation company. They will walk you through the switching process.
4. Your generation will not be switched until you receive a letter from your distribution company verifying your choice. You have 10 days to respond if there is a mistake.
What is the price to compare? The price to compare when shopping is the cost for electricity generation plus transmission; this price is in kilowatt-hour (kWh) and is offered by electric suppliers. Electricity rates can be fixed, variable, or time-of-day.
- Fixed rate: The price of electricity will remain the same throughout the contract.
- Variable rate: The price of electricity will vary monthly depending on the market.
- Time-of-day rate: The price for electricity fluctuates depending on the time of day it is used. During peak hours, when there is a higher demand, electricity costs more. It is typically cheapest at night, when businesses have closed.
It is important to remember that the generation and transmission costs do not represent the entire electricity bill, but only the generation supplier's portion. The entire bill includes charges for distribution services -- this cost will be the same regardless of the supplier.
Can I get renewable energy? Some suppliers offer renewable energy plans. Another option is to add-on a renewable energy component to your electric supplier plan. This additional cost will be added to your monthly bill to support renewable energy.
What should I know before switching? Before switching electric suppliers, consider the length and other terms of the contract including: generation price, additional metering costs, services including energy audits, and cancellation fees. Some suppliers require year-long contracts and charge early cancellation fees whereas others charge monthly and have no fees for leaving early.