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Power grab could cost consumers

By: John Finnerty |

A proposed bill introduced in the Senate earlier this month would automatically switch the power company for millions of people in Pennsylvania.

The author of the bill, Sen. Robert Mensh, R-Montgomery County, argued that the move could generate $370 million to the state from payments made by companies bidding to pick up customers. Pennsylvanians have been able to choose their electric supplier since the beginning of 2011. In a memo to other lawmakers, Mensch said that more people would switch electric suppliers, but many believe the process is confusing and complicated.

Consumer advocates say this is hogwash.

According to the state Office of the Consumer Advocate, 34 percent of residential customers of Penn Power and Penelec have chosen different electricity suppliers. Forty-four percent of PPL residential customers have switched electric suppliers.

An AARP survey released last year found that 93 percent of Pennsylvanians over the age of 50 said they were aware they could switch electric companies. Twenty-eight percent of those who did not switch electric suppliers said they looked into the process and decided to stick with their default supplier.

Ray Landis, advocacy manager for the AARP in Pennsylvania, said that he believes the number of people who are familiar with the process of switching electric companies can only have increased in the more than a year since that survey was released.

“The current system works,” said Patrick Cicero, co-director of the Pennsylvania Utility Law Project, based in Harrisburg. “Anyone who wants to shop for a new electric supplier can do so.”

The original version of the bill circulated around the Capitol included language suggesting that electric companies would have to guarantee that customers would see lower electric prices if they were forced to switch suppliers. However, that protection was replaced in the bill with a provision indicating that customers would get $50 from their new electric supplier. In addition, the electric company would pay the state $100 for every electric customer forced to switch to them.

Advocates argue that those costs would simply be passed on to consumers.

“It’s a raw deal,” said Cicero. “Every consumer advocacy organization that I know of is against it.”

The number of alternative electric suppliers available varies dramatically depending on where you live. The list of alternative electric suppliers available to PPL customers runs 12 pages. Switching would save a residential customer $5 to $10 per 1,000 kwh of use.

The Energy Information Administration estimates that the average Pennsylvania home uses 870 kwh a month. The list of alternatives for Penn Power runs only four pages with the best deal only offering $2.50 in savings for 1,000 kwh of use.

The push for the change is largely being driven by the companies that hope to pick up customers if more people are forced to leave their default suppliers.

“We do not have a position on this bill,” said Terrance Fitzpatrick, president and chief executive officer of the Pennsylvania Energy Association. The utilities can recover their costs for providing the default service.

There are some utilities that are more eager to shed the chore of providing the default service, but there is no consensus.

Cicero said that the basic price set by the default supplier may not always be the cheapest, but it is stable and serves as a benchmark price.

Companies competing to woo customers may offer low introductory prices and then raise the price later, and that’s what has consumer advocates and the AARP worried, Landis said.