Saturday, December 26, 2009

Pennsylvania Electricity Deregulation – Weathering the Storm Part 2: Shopping for an Electricity Provider

Many of us are geared up for gift shopping as we rush through the holiday season and sprint to the end of the year. This year, however, the 2010 shopping spree gets a little more complicated. We need to add shopping for an electricity provider to our list.

The uncertainty and finding time to do that can be stressful, but times are changing, and a savvy approach to energy use can amount to big savings to the household budget. And quite frankly, picking an energy supplier is no more difficult than shopping online for a tie for great uncle Fred, unless he has already been scratched off the list in these penny-pinching days.

In my last column, Pennsylvania Electricity Deregulation – Weathering the Storm Part 1: How It Got Here and How it Works,” I focused on how the electricity gets to your home or business, and how deregulation, and the end of a decade of rate caps would change the way we all use electricity.

In Part 2, we’ll look at why starting January 1, 2010, PPL’s customers will see a 30 percent increase in their energy bills (Allegheny customers face the change in 2011), and then we’ll look at how to shop for a supplier that meets your needs.

Theoretically, deregulation creates a competitive marketplace where companies compete for your business. In turn, prices for the product or service are kept low by that very competition. That is what the PUC (Public Utility Commission) and state government set out to do when they deregulated electricity in 1996. The goal was to break up the monopoly of a few utilities, and give more suppliers access to Pennsylvania customers with the end result of affordable electricity. So why the PPL increase?

PPL (PPL Electric Utilities) does not produce power. It buys its supply through competitive bids on the open market. For the past three years, PPL has been buying energy as they are obligated to by the state and sell it to you and without making a profit.

When PPL was buying power for 2010, the energy costs were higher at the time. In fact, the rate increase would have been much higher than 30 percent had not some of the later auctions been cheaper than the earlier ones.

Some of the suppliers that now can enter Pennsylvania bought their supply when prices were down and thus can offer a discount to PPL’s rate. What happens after 2010 is anyone’s guess, but that is what occurs in a deregulated market; you will have to be a more involved consumer to stay on top of the price changes.

If for whatever reason you do not a sign up with another supplier, you will then stay with your current provider, like PPL or Allegheny. If you decide to shop around then where do you start?

In the past few weeks, as a residential PPL electric customer, you should have received a letter that included a list of suppliers. Most PPL customers also have been receiving information from PPL and other licensed providers about electricity purchasing opportunities.

First, if you need to better understand the system and deregulation, then visit my blog at You can find Part 1 of this series and other links.

If you missed the mailed information or tossed it in the trash, then start with the online factsheet by my colleague Dennis Buffington at the College of Ag Sciences. The factsheet offers shopping tips for residential, business and commercial customers. Worksheets to record the suppliers’ responses can be downloaded at the Cooperative Extension site,

After arming yourself with the needed information and the worksheets, you need to visit PUC’s “Utility Choice” site, I feel the “Utility Choice” site is one of the best organized state sites I have ever used. By going to the electric part of the site and clicking the supplier’s button, you will see a list of EDCs (distribution companies, utilities) that serve Pennsylvania customers. Click on your current utility, in this case PPL or Allegheny, and you will get a list of the licensed suppliers in the state. As of this writing, there are six suppliers for PPL residential and many more for the business customers. Allegheny Power Region has none at the moment for residential, but that will change next year as their own rate caps come off.

I know of two suppliers, Direct Energy and Dominion Energy Solutions, which have mailed out marketing pieces to PPL customers. Both offer a discount to the upcoming of PPL rate. The terms vary between the two companies. I have talked to Dominion’s corporate communications person and two of its customer service people, and I found them clear and precise on the plans they offer.

Generally the process is fairly simple. You can call or go online. Some plans have one year or longer contracts. Some have no contracts for 2010; you just sign up. Some plans let you leave early without paying penalties; others you pay a penalty. Some have one rate for the entire year; others have a lower rate for the first three months and then a slightly higher rate for the rest of the year.

Some plans are still in limbo while they wait for PUC approval. There are also plans for those interested in purchasing energy produced by an alternative source like wind energy.

Do your homework and ask questions about the rates, and if any contracts and penalties apply. It may seem confusing and time consuming, but it’s not once you dive in.

One important factor you need to remember is that whatever happens, you will always have a reliable source for electricity. By law, if your chosen supplier fails to provide you with electricity, then your “default supplier,” which for many is PPL, will provide you with power at its prevailing price.

You really have nothing to lose by making the effort, and the education and savings you’ll get are worth it. So get out there and start shopping.

Have a great holiday and an energy efficient New Year, and put great uncle Fred back on the list.

The next column in the series will be “Act 129 – The Brave New World of Electricity Distribution.”