PECO

PECO Energy has announced that their default supply electricity rates will increase on September 1, 2013. The increase will be about a full penny per kilowatt hour higher than the rate that was charged during the summer, resulting in a $10 per month increase for a home that uses 1,000 KWh in a month.

The power rate increase will only occur for those PECO Energy customers who have not shopped for competitive electricity. To date only 31% of PECO residential customers are buying their electricity from a alternative energy supplier, meaning that the rate increase will take place for 69% of customers in southeastern Pennsylvania. The rate increase has presented a savings opportunity for these default paying customers. The increased PECO rates combined with lower competitive electric rates gives customers the chance to save money on their electric bill if they are willing to spend a few minutes shopping for competitive power rates.

Many customers have chosen to lock into long term fixed rate electricity agreements with energy companies that will not only protect themselves from the rate increase that will take effect in September, but also protect them from future potential rate increases. Many energy analysts are forecasting energy prices to increase from now throughout 2014 making now an idea time to lock in low fixed electric rates.


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In discussing the best time to lock in fixed business electricity rate contracts, there is a wide misconception that fixed electricity rates go down during the fall and spring season of the year. While recent historical data may lead one to believe this may be the case, following this to an end in itself is a fallacy and can cost businesses money as they sit around and wait for prices to potentially fall.

Fixed electricity pricing is based on future forward contracts. With natural gas being a significant source of electricity generation in Pennsylvania, fixed rates are highly correlated with natural gas future contracts. This means that when you look to lock in a two year fixed electricity price, the forward natural gas prices for the next 24 months have an effect on the final fixed price for power. Every month included in the duration of the contract will have a set rate the moment the contract is signed. The final fixed price will be the weighted average of the estimated amount of electricity a business is expected to use for a given month times the rate. This means if a Pennsylvania business customer decides to lock in a fixed commercial electricity rate in the middle of summer the price will take into account the cooler months that come along with the fall and spring seasons.

Locking in a fixed rate will protect Pennsylvania business customers from the volatility associated with the energy market. The fixed rate will put a ceiling on the price if the market were to rise during the term of the contract. If the market were to drop you are not necessarily stuck with having to pay a higher rate. More and more electricity suppliers are offering the blend and extend option in Pennsylvania. This allows a business electricity customer on a fixed rate product to immediately lower their rate at any point during the term of the contract in return of extending out the contract. Exercising this option will maximize the savings for the initial term of the agreement while extending out protection against the risk of a potential rise in future energy prices.

Fixed rates are the most common rate structure for those looking to get off PPL, Met-Ed, or PECO’s high default rates. One appealing feature of fixed rates is the transparency in allowing a company to forecast their annual electricity expenditures. Those businesses still on the utility default rate will have to deal with large swings in costs when the electric bill comes due. Budget certainty is a great asset to have when dealing with a volatile market. With the blend and extend option in place, Pennsylvania business customers looking to sign a fixed rate may want to consider locking in a term for several years.

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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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After having seeing a significant rate drop on electricity prices for the summer, PECO electric customers were surprised to learn that their power generation rates are expected to go back up in October. PECO Energy announced the expected rate increase, which will last through the end of the year, on their website in July. The finalized actual rates should be posted in August, but for now the increase will raise generation supply charges by over 18% on the PECO electric bill.

Fortunately customers can get a lower PECO bill by shopping for competitive electric rates through alternative energy suppliers. PECO Energy, who delivers power to the Philadelphia region in southeast Pennsylvania, charges customers who have not selected a competitive supplier a default electric rate. The default rates include the charges on the bill for generation and transmission. When consumers use their right to shop the market and select a lower electric rate, the competitive rate replaces the default generation and transmission charges on the bill.

Customers who have locked in low fixed electricity prices in previous months will not be effected by the PECO rate increase in October. The Pennsylvania electricity market gives consumers the ability to take control of their electric bill. Those consumers who have embraced competitive electricity are reaping the benefits while those who have shied away are paying more to power their homes than they need to. News of the PECO rate increase should provide a reason for many first time shoppers to explore the competitive market and find a low electricity rate.


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PECO Electric Prices Drop

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Electricity prices for PECO customers are set to drop in July, but not before a slight increase in June. Small power users, those who use less than 500 KWh a month, will not be effected by the June increase. The increase will only effect power users who use more than 500 KWh a month, which […]

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Philadelphia Business’s Save on their Electricity Bills

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For some business owners it is a simple concept; take a few minutes to compare electricity rates and end up saving between ten to 25% on a necessary business expense, the electricity bill. However, for many others the concept of electricity choice and deregulation is still foreign. Those who have been quick to adapt to […]

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PA Electricity Choice Pushes Down Prices

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Electricity choice in Pennsylvania allows for alternative power companies to solicit customers who previously did not have choices when it came to who do buy their power from. The program seems to be working as more power companies continue to offer service in the state, resulting in lower electricity prices for energy shoppers. Electricity customers […]

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PECO Price to Compare Rates Increasing in April 2012

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Despite falling natural gas prices the PECO electricity price to compare, the rate that PECO customers pay for electricity who do not choose an alternative energy supplier, will be going up on April 1, 2012. PECO Energy is the electric utility company who serves the majority of Philadelphia and the surrounding area. Their responsibility is […]

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Electricity Savings in MetEd

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Alternative Power Companies in Pennsylvania

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While electricity shopping has increased throughout the year in Pennsylvania, an abundance of confusion remains on the finer points of Pennsylvania’s deregulated electricity choice market. One of the biggest subjects of confusion is the new role of the incumbent utility companies – PECO Energy, Pennsylvania Power and Light, Met-Ed, Duquesne Light, and more. Prior to […]

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