The Economic Benefits of Pennsylvania’s Competitive Market are Clear

Electricity competition is at an important crossroads in Pennsylvania. Six months ago, rate caps expired in one Pennsylvania utility’s service area, and six months from now rate caps expire in the rest of the state. For the first time, the state’s entire retail market will be open to competitive forces.
 
But already, the success of competition is clear. Wholesale electricity prices are decreasing, and hundreds of thousands of consumers are switching power suppliers to obtain lower-cost electricity than is available from their incumbent utility suppliers.
 
This reality tells a different story than recent references by some to a flawed study which led to misguided conclusions of higher consumer rates. As Steve Elsea, Director of Energy Services for COMPETE member Leggett & Platt Inc., recently testified at a Pennsylvania State Senate hearing: 

“Leggett operates two production plants in Pennsylvania and competition has directly benefited our business through demand response strategies, energy efficiency upgrades, and the ability to shop for competitive suppliers.”

In PPL Electric Utilities’ service territory, nearly two-thirds of the electricity delivered is being purchased from alternative energy suppliers. In fact, the PPL market has had higher switching rates than any competitive energy market at opening or rate cap expiration, according to energy industry analyst KEMA. As of this week, 442,000 PPL customers – 32 percent of total customers – have chosen a different power supplier. This represents 373,000 residential customers and 69,000 commercial and industrial customers, totals considered “astounding” by the state’s Public Utilities Commission Chairman. 

Meanwhile, incumbent utilities and alternative suppliers are gearing up for pending rate cap expirations elsewhere in Pennsylvania by driving down prices and announcing more competitive energy options.
 
The price-to-beat for customers in Allegheny Energy’s service territory was lowered through a power auction to secure supply when rate caps expire in December. Residential customers are expected to see only a modest increase in their bills when rate caps expire in 2011, and some commercial and industrial customers may actually experience rate decreases. Price-to-beat refers to the rate an incumbent power supplier offers to customers in a competitive market, which alternative suppliers then compete against. 
 
In Central Pennsylvania’s Metropolitan Edison Co. service territory service area, an alternative energy supplier has already announced it would compete with the incumbent utility for customers when rate caps expire in December. Considering 14 alternative suppliers now compete in the PPL Electric Utilities service territory, MetEd consumer options will likely keep increasing as 2010 draws to a close.
 
Competitive markets have clearly benefited the Keystone State, and those benefits increase by the day. Prior to competition electric rates in the state were 15 percent higher than the national average, but they are now well below the national average.
 
Pennsylvania is expected to lead the nation in growth of competitive retail electricity sales through 2011. As the market continues to mature, competition’s economic and environmental benefits will become even more apparent. Only by keeping to door open to competition will all Pennsylvania consumers have the opportunity to benefit after remaining rate caps in the state expire next year.
 

Joel Malina | June 11, 2010