Pennsylvania is currently in the middle of a transition to electric competition for most customers.
With landmark legislation in 1996, Pennsylvania became one of the first states to give customers an opportunity to choose their energy provider.
Pennsylvania's utilities sold their power plants to open the market to competition, and now only own the transmission and distribution wires, while also providing 'backstop' power to customers who do not shop for electricity. With the move to competition, the utilities have separated service into two parts:
- Regulated distribution of power, which is still only provided by the utilities, and
- Supply of the electric commodity, which is open to competition.
Customers can choose to receive their electricity supply from their utility, or an alternate energy provider.
Customers who do not choose an alternate electric provider receive default service from the utility. In some parts of the state, utilities buy default service power through competitive auctions, including at Duquesne Light, Penn Power, UGI Utilities, Pike County Light and Power, Wellsboro Electric, and Citizens Electric. Rate caps have expired in these six areas. In the rest of the state, default service rates are capped, and supply is bought on legacy contracts from when the market opened.
However, these rate caps are due to expire in the coming years. At PPL, rate caps expire at the end of 2009. At PECO, Met-Ed, Penelec, and West Penn Power (Allegheny), rate caps expire at the end of 2010.
Each utility will buy its own supply differently when the rate caps end, but will generally follow a similar pattern. Most power for residential and small business customers will be bought through competitive auctions on a rotating basis, with a mix of long-term supply contracts and spot market purchases. This mixing of contracts is meant to mitigate power price volatility; however, it can add a risk premium to prices due to hedging power on a long-term basis. Additionally, since contracts have mixed lengths, decreases in power prices won't be seen right away, because some higher price contracts will remain in effect. Customers can avoid the risk premium, and take advantage of falling prices faster, by choosing an alternative energy provider.
For larger businesses, default service supply will be bought on the wholesale spot market, with prices changing hourly. To avoid these volatile hourly prices, large businesses can contract for a fixed price with an alternative energy provider.
Customers who choose an alternate energy provider still have their power delivered to them by their utility, and contact their utility for all outage reporting. Customers can choose to receive either a single bill from their utility for their delivery service and energy supply service, or can receive two bills, one from each company.
Natural Gas:
The Pennsylvania Public Utilities Commission has reformed the natural gas industry to give customers a chance to shop for lower natural gas rates. Starting in 1999, the gas utilities started a process to open their service areas to allow customers to choose a different company to supply them with their gas supply. PECO, Columbia Gas, Dominion Peoples Gas, Equitable Gas, National Fuel Gas, Philadelphia Gas Works, UGI Central Penn Gas (PPL Gas), UGI Penn Natural Gas, UGI Utilities-Gas Division and TW Phillips Gas and Oil Co. currently offer gas choice. Customers choosing an alternate gas supplier will still have their gas supply delivered by the local utility, but customers will be buying their gas supply from a new company.
A customer's natural gas bill has been separated into two parts:
- Regulated distribution of gas, which is still only provided by the utility, and
- Supply of the gas commodity, which is open to competition.
Customers can choose to receive their gas supply from their utility, or an alternate gas provider.
If customers do not shop for an alternate gas supplier, they receive default supply service, or sales service, from their utility. Under default supply service, customers pay a supply charge composed of a 'Commodity Charge' and a supply tracker called a 'Gas Cost Rate' or 'Gas Cost Adjustment Charge' to compensate the utility for arranging for their supply. Combined, these charges equal a 'price to compare,' which can be used as a benchmark to compare utility supply service and supply service from an alternate natural gas supplier. The various components of the utility supply charge can change throughout the year, meaning customers do not have price protection and can be exposed to volatile swings in monthly prices. Customers can avoid wild swings in the gas supply charge by contracting with an alternative gas supplier.
No matter who you choose to buy energy from, your local utility will continue to deliver your gas and respond to service interruptions and outages. You will still pay your utility for these services. Depending on your area, you can choose to receive a single bill from your utility listing your utility delivery charges and supply charges, or separate bills from the utility and alternate energy provider.
