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Pennsylvania’s electricity marketplace braces for another winter

By: Michael Sanserino |

The calendar says winter is less than one month away. The thermometer says it’s already here.

It is the first winter since a variable rate crisis generated more than 11,000 calls to Pennsylvania’s Public Utility Commission and 9,000 informal complaints about higher-than-expected electricity bills. Some bills were 300 percent higher than previous bills, all because record high demand drove up the price of electricity on the spot market.

In the year since, thousands of customers have abandoned Pennsylvania’s competitive electricity marketplace for the familiar arms of the default utility company; the PUC has imposed a series of regulations meant to protect the customer, and competitive suppliers have tooled their own plans to lure customers back to the marketplace.

The winter of 2013-14 brought some of the coldest days on record and, with that, some of the highest demand for electricity. Of the 10 highest winter demand days for grid operator PJM, eight occurred last January.

Some companies did a poor job hedging their supply purchases and were stuck paying the full spot market price for electricity supply. Those costs were passed onto consumers with variable rate electricity plans, causing huge spikes in energy bills.

The industry was deregulated in 2010, which allows customers to shop for electricity supply. While the default utility company – such as Duquesne Light or West Penn Power – still distributes power, consumers have the option to buy the supply from other companies.

At the start of last winter, 39.3 percent of all electricity users in Pennsylvania got their electricity from a competitive supplier. Now, 38.0 percent use competitive suppliers, meaning about 70,000 customers have left the competitive marketplace in the past year.

“We pride ourselves in having a strong, robust marketplace,” PUC vice chairman John Coleman said in an interview last winter. “These situations, real or perceived, really don’t bode well for us.”

Despite the loss in customer volume, competitive suppliers are responsible for 68.4 percent of the state’s electricity load, up from 65.4 percent last winter.

“Markets go up and down and ebb and flow, but I think Pennsylvania will continue to be an important market for suppliers,” said Frank Caliva, spokesman for the American Coalition of Competitive Energy Suppliers, a trade organization in Washington.

Denise McCracken, a spokeswoman for the PUC, said in an email that the drop could be attributed to a number of issues, including concerns about the variable rate problems of last winter.

Last month, the PUC launched “Prepare Now,” an outreach campaign designed to help customers weather the winter with their home energy bills. The campaign has been around for 12 years, though it typically focuses on helping consumers reduce their energy bills. This year it is encouraging residents to review their energy contracts to make sure they have the right plan to suit their needs.

“Now is the time to take steps around the house to reduce your winter energy bills,” PUC chairman Robert Powelson said in a news release. “Step one is to check your electric and natural gas supplier contracts now so you can lock in the lowest possible price for winter. Step two is conservation.”

The PUC spent much of the past year rewriting regulations so that consumers are better able to switch electricity suppliers. Customers used to have to wait until their billing cycle was complete before a switch could be processed, which took between 11 and 40 days. Now those changes must be made in three business days.

The PUC also included more rules about what suppliers had to include in contracts with customers and what kinds of notifications it had to send customers when a contract expired or a rate changed.

“The Public Utility Commission has been and continues to be extremely aggressive in educating consumers and took actions immediately,” Ms. McCracken said.

Mr. Caliva said the moves by the PUC mirror what other regulatory bodies are doing in other states.

“The devil’s always in the details,” he said, “but we think customer disclosure is an important tool as part of a broader consumer education.“

Power plants think they’re ready for the winter, too. After the bitter bite of winter returned to the region last week, with wind chills below zero, FirstEnergy Corp. reinforced it was ready to handle the high winter load. Mr. Caliva said natural gas storage levels have recovered since being depleted during the chill of last winter.

“There was good preparation over the past year for the winter,” he said.

PJM reported that Nov. 18 marked the highest November demand day on record in 13 states, including Pennsylvania. And if that was a test for what is to come in the winter, the industry passed.