In Restructured Markets, Don’t Confuse Distribution Utilities with Competitive Power Suppliers

Lower-cost electricity options in Western Pennsylvania are “the kind of significant savings envisioned by competition’s crusaders” a Pittsburgh Post-Gazette columnist writes in a recent column. The columnist’s effort to explain the competitive electricity market to consumers deserves applause.
 
But the relationship between the region’s power distribution utility and the competitive power supplier who offered the columnist less expensive electricity was confused in the article, and should be put in proper context.
 
The newspaper columnist’s distribution utility, Penn Power, is not an energy generator or power supplier. It acts as an intermediary to deliver power to customers. In Pennsylvania’s competitive market, Penn Power is a delivery company bringing competitive electricity supplies over its distribution lines to customers. Penn Power makes no money from electricity generation and is indifferent to who provides it, as long as customers’ needs are met.
 
Penn Power, like other restructured power distribution utilities, solicits electricity supplies from competitive providers under a state-mandated process. This electricity supply solicited by Penn Power comes from four different competitive power suppliers selected through a competitive auction process. Electricity consumers who do not choose to purchase from a competitive retail power provider receive this default service from Penn Power. 
 
Meanwhile, competitive options abound for all classes of consumers served by Penn Power’s distribution system who do elect to choose an alternative power provider. There are 13 retail power providers licensed by the state to supply customers in Penn Power’s footprint, and about half of those suppliers are currently providing competitively priced electricity to residential, commercial and industrial customers.
 
Penn Power’s customers aren’t passed back and forth among subsidiaries of one company. Rather, they benefit from competition among multiple retail suppliers – whether they choose their own supplier or stay with Penn Power’s default service.

Joel Malina | July 15, 2010