Recently I have been involved in electricity and natural gas utility sourcing for one of our clients involving multiple states. One of the first tasks was to identify which U.S. states were regulated or deregulated for electricity and natural gas. Moving forward with another one of our clients I discovered while Pennsylvania is technically deregulated for electricity there is no market for competition (FYI - natural gas is currently deregulated as well but this blog focuses on electricity regulation).

Upon further research I found a great ‘webinar’ presentation from third party supplier Constellation Energy. I had missed the actual presentation date by a month or so but fortunately it was recorded and posted on their website (Go to Archive of Webinars at the bottom of this linked page to playback). I’d like to share some of the information from this presentation specifically regarding the deregulation of Pennsylvania Power and Light (PPL) utility customers. Note that quoted items are taken from Constellation’s webinar presentation mentioned above.

“In 1996, Pennsylvania enacted the "Electricity Generation Customer Choice and Competition Act." The Act provided customers with the opportunity to buy their electricity requirements from a competitive supplier rather than from the local utility. The Act also froze PPL customers' electric rates at 1997 levels through the end of 2009. Now, PPL will transition its rates to market levels starting in 2010.” That’s right, you heard it! This Act started the move to market based rates. Rate caps are coming off in a very different environment then when they were set in 1997. Where were you 12 years ago?

To add to the confusion, PPL rate caps are set to expire at the end of 2009 but the other PA utilities are set for the end of 2010. In response, PPL has created a “bridge plan” to help bring themselves into line with other utilities. Procurements of default service power supply have already begun for 2010. Although the final rate will not be known until all procurements are complete, current results imply there will be an approximate 35% increase in rates depending on your rate class (i.e. residential, small business, commercial and industrial). “PPL also has a 2011-2014 default service procurement plan being considered by the commission currently which is similar to the Bridge Plan.”

PPL’s Proposed Rate Mitigation Plan offers its customers a choice to ease the transition to market based rates. Customers may “opt in” to deferral of the post 1/1/10 rate increase which entails a deferral with 6% interest being repaid by the end of 2012. Participating customers would receive a bill credit intended to limit the rate increase to 25% for 2010 and an additional 25% for 2011.

With all this talk about rates increasing you might wonder if there are any benefits of competition. The webinar presented the following information.

“Competitive markets benefit customers by:
~ Efficiently matching supply and demand
~ Providing mechanisms to manage supply and price risk and volatility
~ Allowing suppliers to compete stimulating innovation of products and services
~ Optimizing generation fuel mix and operational efficiency
~ Generating price signals to incentivize new generations development where and when needed
~ Providing mechanisms for the development of green products (renewables, demand response, energy efficiency)”

If you aren’t already familiar with the inner-workings of how electricity is brought to you, this webinar also provides an easy to read chart. Essentially broken out into three portions as I’ve shown below.

With competitive supply (generation) options customers have the right to choose a competitive supplier for their electricity needs. The utility (PPL) still provides distribution service and there is no impact on reliability. So if you are currently with PPL, make a mental note to start shopping around later in the year and you just might save some green! If you are not located in PA I would suggest you look into your current supply rates and don’t hesitate to start shopping around for a better rate if your state is deregulated. Either way, check out the full webinar to fill in any blanks above and contact us if your business is interested in pursuing utility savings today!
Share To:

Tina Lamanna

Post A Comment:

0 comments so far,add yours