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.