The Basics of Pennsylvania Electricity Choice for Business Owners

Pennsylvania business customers still with Pennsylvania Power and Light’s default service have experienced large swings in their default rates since the PPL cap rates first expired in 2010. They are not alone as many customers still on Met-Ed’s default rate and PECO’s default rate have also experienced large fluctuations in the price of their electric bill. As higher default rates force many to start shopping for competitive electricity rates it is important to understand the basics of Pennsylvania electricity deregulation and what it means for electricity choice in your area.

The electric bill is split up into two basic charges: distribution charge and supply charge. The distribution charge is a regulated charge and will not be affected by switching to a competitive electricity supplier. The distribution charge deals with the cost of maintaining the lines and wires so the electricity can be transferred from your local distribution company directly to your business. The supply charge is the deregulated charge. If your company decides to stay with PECO, Met-Ed, or PPL you will be set up on a default rate determined by a series of auctions. A company on the default rate can choose to switch to a competitive supplier anytime without being penalized. Due to a number of factors involved including the high volatility of the energy market, a company will be charged a premium if they decide to stay on the default rate.

When you start shopping for competitive electricity rates it is important to make sure the suppliers are including all components of the supply charge. The three basic components of the supply charge are energy, capacity, and transmission. These components can be further dissected to line loss, ancillary, congestion and so forth. Some suppliers will leave out a component of the supply charge to make their rate more attractive. However this charge will then be bypassed onto your electric bill as a separate charge. It is important when shopping for competitive electricity rates to let the supplier know you want an apples to apples comparison to your utilities default rate. Do not let this deter you from taking advantage of the large margin of savings. A typical commercial business in Pennsylvania still on the PECO, PPL, or Met-Ed’s rate will save an average of 15-35% per year by choosing a competitive electricity supplier.

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PSEG Service

Today PSE&G serves as the electricity delivery company for over two million residential and business energy customers living in New Jersey, including major suburbs of New York City and Philadelphia.  PSEG used to be a full functioning regulated electricity company, taking care of all aspects of electricity, generation, transmission, distribution, and customer service.  Now that New Jersey has enacted energy choice, PSE&G is now only in charge of delivering power, transmission and distribution, to their customers.

While New Jersey customers have a choice of who supplies their electricity they do not have a choice of who delivers the power to their homes and businesses.  Many consumers in the PSE&G service territory are reluctant to shop for lower electric rates because they feel loyal to PSE&G.  This is the wrong way to view electricity deregulation.  Even when a customer chooses an alternative electricity company to provide power, that person still remains a customer of PSE&G as PSE&G continues to act as the electric utility company delivery power to the property.

When a PSE&G customer receives their electric bill they will notice that the bill is divided into two sections; delivery and supply.  The delivery charges are those charged by PSEG to deliver power as well as maintain the lines and wires.  The electricity delivery charges are regulated by the New Jersey Board of Public Utilities.  The supply section of the electric bill is the part that customers have a choice and can compare electricity rates among other companies.  PSEG customers who do shop pay a default electric rate that PSEG is tasked with charging.  PSE&G does not receive a profit from these default supply charges as stipulated in the New Jersey Electricity Choice and Competition Act.

In addition to PSEG’s service of delivering power and providing default supply rates, they also continue to provide customers with their monthly electric bill.  Even after a PSEG customer chooses an alternative electricity company to provide their electric supply service, the customer will continue to receive one electric bill from PSE&G, in most cases.  It is possible that the alternative electric supplier will want to send their own invoice in which case you will receive two bill, one from PSE&G and one from the chosen supplier.  However, in most cases the competitive electricity companies choose to have their charges billed as a separate line on the PSE&G bill.

The competitive electricity company’s rate takes the place of the PSEG default supply rate, and if the chosen rate is lower than the default rate the customer saves money on their electric bill.  Here are some competitive electric rates that are currently lower than PSE&G default rates.


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Integrys Energy Review

This article pertains to commercial and industrial electricity customers in deregulated markets where Integrys Energy is active, including but not limited to Maryland, New Jersey, Pennsylvania, Connecticut, Delaware, and New York.

Integrys Energy has offered electricity contracts with misleading rate quotes to commercial and industrial customers.  If you are deciding to use Integrys Energy as your supplier it is extremely important that you either review the contract thoroughly, or work with a consultant or energy broker who is equipped to do so.

As a business electricity customer, here is what you need to know:

Every deregulated electricity state divides their bill into two basic parts, the regulated delivery part and the competitive supply part.  Depending on who is your local regulated utility will depend on how these charges are viewed on your bill.  Sometimes, like in the case of PSEG in New Jersey, the two parts are clearly divided.  Other times, like in the case of PPL in Pennsylvania, the charges are not so clearly separated.

The competitive supply portion of the bill can further be separated into several components (energy charge, transmission, capacity, line losses, etc.).  When you receive a competitive rate offer from an energy supplier, the rate should include every component of the competitive supply portion.  However, what some suppliers do is give a quote that only includes a portion, and then passes on the rest of the charges in a subsection on the bill.

So for example, you might get an offer from Electric Supplier (A) for a rate of 8 cents that includes every aspect of the competitive supply part.  Then Electric Supplier (B) might offer you a rate of 7 cents that only includes part, say the energy charge, of the competitive supply part.  The remaining part of the competitive supply part (transmission, capacity, line losses) will show up on the bill in a different section, and all of a sudden 7 cents is really 9.5 cents.

Integrys Energy practices the method of Electric Supplier (B) from the example above.  Recently I reviewed a contract that they presented to a customer.  After reviewing the contract I found that the customer would have paid exactly double to what they thought they would have paid.  This is because Integrys divided the competive supply part into two sections, and gave both sections the same exact rate.  This was extremely misleading as the implementation of the exact rate for two different sections was designed to make it appear as if everything would be charged the single rate once.  But after taking a closer look, I was able to see that there would in fact be two separate charges.

To summarize the above paragraph, had the customer signed they would have paid:

6 cents per KWh for (energy commodity)

6 cents per KWH for (capacity, transmission, line losses)

12 cents total

The sales person representing Integrys presented the rate as 6 cents.  The customer thought that the 6 cents was a great offer compared to the 8 cents offer they were getting from another legitimate supplier (the 8 cents offer was found to include the entire portion of the competitive supply part).  In reality the 8 cents should have been compared to 12 cents, and not 6 cents.

People making electricity decisions for businesses need to be aware of these deceitful practices.

A simple way to do this is to email the sales person and ask them:  Does the rate include energy, capacity, transmission, line losses, and all other components of the utility price to compare?

Anything less than a “yes” means that there will be some surprises.

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Savings for Atlantic City Electric Customers

Southern New Jersey commercial and industrial customers can now see significant savings on their electric bills if they choose to shop the competitive market for an alternative supplier.  Savings as much as 22% off of the basic generation service default rates have been achieved for many businesses.

Many customers on the MGS and AGS rate classes continue to pay the ACE default rates that are over 12 cents per KWh.  Current fixed rates can be locked in for 12 month terms as low as 10 cents per KWh.  While many businesses are starting to become wise to deregulation, the majority of ACE customers are still unaware or confused about the savings available.  We encourage all businesses in the ACE utility service area to shop for a competitive supply contract.

Update:  12/23/2010

Atlantic City Electric residential electricity customers can save 22% off of their default rate with a variable rate and $50 Cash back bonus by going here

Fixed electric rates with savings between 15-22% (plus up to $75 Visa Prepaid Card) can be found here

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