As electric rates go up, consumers consider alternatives

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January 3, 2011

By Keith Gushard Meadville Tribune The Meadville Tribune Mon Jan 03, 2011, 07:30 AM EST

MEADVILLE — Walter Niwa of Vernon Township isn’t taking much comfort in the fact that Pennsylvania Electric Co. customers like him have been hit with a 16.6 percent increase in electric rates — instead of an estimated 60 percent or more that was forecast three years ago.

Rates went up Saturday as a cap on electric generation rates expired for Penelec on Dec. 31 and rates now reflect current market prices.

For the average residential customer using 750 kilowatt/hours a month, the average total bill will rise $14.16 a month — from $85.35 to $99.51.

“There’s not much I can do about it,” said Niwa, a retiree who lives on a fixed income. “About all I can do is change bulbs.”

Rate caps expiration happened Saturday for customers of Penelec, Peco Energy Co., Allegheny Power Co. and Metropolitan Edison Co. — affecting about 60 percent of Pennsylvania’s population.

Since 1999, caps have expired for seven other utility companies across Pennsylvania with varying results.

The increases for Penelec and the other three utilities aren’t as painful as once expected, thanks to a slow economy and the growing natural gas industry across parts of North America.

“Rate caps are coming off at a time when energy prices across the economy are pretty reasonable,” said Irwin (Sonny) Popowsky, the state’s utility consumer advocate. “For better or worse, we took our time here in Pennsylvania. I think the transition has been reasonable.”

The rate increases are much less onerous than what could have been if natural gas prices were higher. As recently as the summer of 2008, the price for natural gas was as high as $13 to $14 per 1,000 cubic feet, but those figures are down to about $4 per 1,000 cubic feet now.

Right now, the only major utility competition is shaping up in the Philadelphia area, where 17 electric suppliers are making offers to customers, Pennsylvania Public Utility Commission spokeswoman Jennifer Kocher said.

Penelec customers have only one alternative, and it’s offered by FirstEnergy Solutions, an unregulated power generation division of Penelec’s parent company — First Energy Corp.

“Our hope is that that will pick up after the first of the year,” Kocher said.

The removal of rate caps raises Penelec’s price from 5.7 cents to 7.03 cents per kilowatt hour.

Customers who choose First Energy Power Solutions pay an even 7 cents per kilowatt hour.

Energy companies are wooing potential customers through mail, billboards and TV ads, while the PUC and the state’s utility consumer advocate are posting competitive offers online for customers to compare. The PUC has set up a website for consumers at papowerswitch.com.

Customers do not have to switch. Even if they do, they will still get their bills from the default electric providers, which remain in charge of maintenance of the lines and distribution of the electricity; but a different company will actually be providing the power.

Last year, nearly 500,000 of PPL Corp.’s 1.4 million electric customers in Pennsylvania switched when PPL’s rate caps expired.

Customers should pay close attention to their options and look for ways to save as the competitive market grows, said Jim Cawley, chairman of the PUC.

“Shopping will become more and more accepted,” he said, noting that some providers are offering things like sign-up bonuses, discounts for veterans and frequent flyer miles.

He cautioned customers to take a close look at service agreements and rates to make sure that they are getting the best deal.

With the caps lifted, rates will now be changing on a quarterly basis, and could go up or down each time depending on the market.

“We caught a real break with the lower wholesale electricity prices,” Cawley said. “That’s a function of the down economy and the fact that natural gas is plentiful.”

The gas industry is robust, with drillers swarming to shale formations around the country, including the lucrative Marcellus Shale beneath Pennsylvania, New York, West Virginia and Ohio.

Pennsylvania’s electric deregulation began in 1996, when the Legislature put the rate caps into effect and paved the way for competitive markets to replace electric utility monopolies.

In the intervening years, consumers, consumer advocates and others have worried about drastic increases in the price of electricity after the caps came off.

Nowhere was the effect more painful than in sparsely populated Pike County in northeastern Pennsylvania, where the rate cap expired in 2005. There, the average rate increase for the 4,500 Pike County Light & Power customers was 68 percent because the electricity was purchased at about the worst time ever — the height of the fallout from Hurricane Katrina.

But it’s not the case now, as regulators say the sluggish economy and plentiful natural gas supply have created a good climate for customers.

“We’ve had a wonderful lineup of the sun, moon and stars,” Cawley said.

The Associated Press contributed to this report. Keith Gushard can be reached at 724-6370 or by e-mail at kgushard@meadvilletribune.com.

For more information about switching power suppliers, visit the Pennsylvania Public Utility Commission’s website at papowerswitch.com.

It explains about switching power suppliers, how to find and choose a supplier and what questions to ask.

The site also offers tips on saving energy and help on paying an electric bill.

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As electric rates go up, consumers consider alternatives

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