Philadelphia Considers Creating Energy Cooperative for Entire City

Last month Philadelphia councilman Darrell L. Clark introduced a bill that would create a new Philadelphia Energy Authority that would serve as a cooperative to combine the electricity buying power of residents, businesses, and government.

The bill is a result of electricity rates in Philadelphia that have been capped since 1996. The cap expires on January 1, 2011 at which point electricity rates are expected to rise for those customers who remain with PECO, the regulated electricity delivery company in Philadelphia and the default electricity supply provider for customers who are slow to shop the competitive market.

To summarize, Councilman Clarke wants to create an organization that represents as many consumers as possible, and then buy power on their behalf. It appears that the councilman is trying to take advantage of an uneducated group and prosper in the competitive electricity market by marketing his group as a government entity doing good. In actuality the group will act like any other profit seeking firm offering customers discounted electric rates versus the PECO default rates in 2011. This act gives consumers the false appearance that the government is looking out for their best interests. The reality is that such a group would be in a position to make a lot of money for selling the electricity of the group to a licensed retail electric provider.

The actual increase in electricity prices from 2010 to 2011 in the greater Philadelphia area is still unknown since it will be dependent on auctions that have not yet taken place. The increase is however expected to be about 10% higher from current rates. Customers in Philadelphia can expect a number of licensed electric providers and consultants to enter the market to offer competitive rates and products, which is the purpose of the 1996 Electricity Generation Customer Choice and Competition Act. Deregulation creates jobs, product innovations such as efficient green energy, improved customer service, and in time lower rates. Having the government step in to purchase electricity for everyone is a step away from retail competition.

Sonny Popowsky, the state’s Consumer Advocate, said similar arrangements are under consideration on the state level, including a House bill to allow an authority to buy power on behalf of its residents. Such a bill would not be needed to accomplish what Sonny Popowsky is proposing here. Any organization could simply apply for an Electricity Aggregators License with the Pennsylvania Public Utility Commission. This is just another example of a government entity trying to use their image to prosper in a competitive (private) marketplace.

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