That hasn’t happened.

In two parts of Western Pennsylvania, where market rates rule, for example, less than 20 percent of residential customers have opted for alternative suppliers, despite offers of discounts ranging from 7 percent to 10 percent.

Instead of choosing a power supplier that would save a typical Pennsylvania household about $100 a year, residential customers there seem to be saying that the savings just aren’t worth the hassle of shopping.

“The idea was to give customers a choice,” said James H. Cawley, chairman of the state Public Utility Commission. “You can only do so much, and if people don’t help themselves, you can’t make them.”

But Cawley and others say they believe the climate might change dramatically in the next month as full competition is introduced to the vast territory in central and eastern Pennsylvania served by PPL Electric Utilities Corp., of Allentown, which has 1.4 million customers, nearly a quarter of the state’s total.

Today, state-mandated caps will be lifted in PPL territory – which includes parts of Bucks, Montgomery, and Chester Counties – and rates will go up about 30 percent. Five suppliers are blanketing the territory with ads and direct-mail offers of discounts that would cut the amount of the increase about a third.

Already, 148,000 customers, more than 10 percent, have signed up.

The experience in PPL territory will set the stage for the complete transition of Pennsylvania’s regulated electric utilities to open competition at the end of 2010, when rate caps expire for five remaining utilities, including the biggest, Philadelphia’s Peco Energy Co.

Power brokers are ramping up activity in the state now, with the aim of establishing a long-term presence. Cawley said he had talked to the electrical-generation suppliers, “and they think the Peco market is huge.”

If the industry’s experience in Western Pennsylvania is any indication, residential customers will be reluctant to embrace the change.

In areas served by Duquesne Light Co., of Pittsburgh, and Penn Power Co., of New Castle, Pa., where rate caps came off in recent years, only about one in five residential customers have switched suppliers – though a majority of commercial customers and nearly all industrial customers have.

“We and the utilities haven’t done enough to educate customers,” said Dan Donovan, spokesman for Dominion Retail, a nonregulated subsidiary of the Richmond, Va., energy company that markets in Pennsylvania.

Under the Electricity Generation Choice and Competition Act of 1997, utilities such as Peco and PPL Electric divested their power plants and became distributors that deliver electricity to customers. They earn profits only for the monopoly service they provide to all customers, such as billing and maintenance of distribution lines. Those charges are still regulated by the PUC.

Though the utilities are indifferent to which suppliers their customers choose, the PUC has ordered them to provide power to those customers who do not choose. A utility’s rate, which is an average price of contracts from power suppliers who bid at auctions, is called the default rate.

PPL’s default rate is 10.45 cents per kilowatt-hour, compared with prices of 9.38 cents to 9.52 cents per kilowatt-hour from alternative suppliers. The average Pennsylvania residential customer consumes 10,500 kilowatt-hours a year, so those pennies add up.

Donovan said many customers misunderstood the process of shopping for a generation supplier, whose charges typically make up about 70 percent of the total bill.

“It’s painless,” he said. “You still get one bill. It doesn’t change anything.”

Suppliers offering the best prices typically want customers to commit for at least a year. Some impose fees for early cancellation of the contract.

Cawley, the PUC chairman, said customers who did not switch often said they could not be bothered with shopping for savings of only $100 a year.

“That’s not serious money?” he asked.

Many customers also fear that by choosing a supplier other than their present utility, they will be penalized with poor service.

“It’s nonsense,” Cawley said.

More information is available on the PUC’s Web site: http://www.puc.state.pa.us/utilitychoice/. The Pennsylvania Office of Consumer Advocate also has compiled information on competiting offers: http://www.oca.state.pa.us.

By Andrew Maykuth

Inquirer Staff Writer

Contact staff writer Andrew Maykuth at 215-854-2947 or amaykuth@phillynews.com

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The approximately 70 percent of your PPL bill that deals with electric energy itself — rather than the equipment and upkeep — is going up. If you do nothing, your electricity cost will rise 30 percent. If you’re a residential customer and select one of the five providers competing for business, you’ll almost certainly pay a smaller increase.

The Pennsylvania Office of Consumer Advocate has a Web page listing residential suppliers and rates. Check it out at www.oca.state.pa.us/Industry/Electric/elecomp/PPL.pdf, or call them at (888) 668-4775 to learn more about suppliers’ offers.

Yes, the process can appear daunting. But for PPL customers, deregulation is here, and the only way to lessen the financial impact is to shop for a better deal. Compare your current per-kilowat-hour cost to that of competitors listed on the Consumer Advocate site. Check the terms; some charge a penalty if you sign a contract and cancel early. Then contact the companies of your choice to learn more.

Document your experiences and inform the Office of Consumer Advocate and the Pennsylvania Public Utility Commission if you feel you were treated unfairly. That will help form the basis for improvements going forward.

Unfortunately, higher electric prices are here for customers in the PPL service territory. It remains to be seen if competition and incentives to reduce consumption will produce the benefits proponents promise. But consumers must take matters into their own hands if they are to make the best of it.

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State imposed price caps are coming off, and five new companies are competing for residential customers under the Public Utility Commission deregulation process.

It’s not too late for PPL customers to switch providers for the 70 percent of the billing charge open to competition, and won’t be too late even after the Jan. 1 deadline passes.

“As long as suppliers are still out there making offers, customers can switch,” says PPL Electric Utilities spokesman Ryan Hill. “That can happen throughout 2010.”

PPL Electric Utilities will begin focusing its business on transmitting electricity while allowing other companies to generate and supply it. PPL will be the default supplier for customers who don’t switch.

The Pennsylvania Office of Consumer Advocate said five companies are offering electricity to PPL residential customers: Con Edison Solutions, Direct Energy, Dominion Energy Solutions, Liberty Power Holdings and MXenergy.

No matter what, customers’ bills for electricity will go up in 2010. But all competitors are offering at least some rate plans at lower costs than PPL Electric’s $10.448 per kilowatt hour. Some companies will impose penalties if customers leave before the contract expires, while others allow customers to leave with no cancellation penalty.

To see company rate comparisons, go to the Consumer Advocate’s Web page at www.oca.state.pa.us/Industry/Electric/elecomp/PPl.pdf. or call call (888) 668-4775 to learn more about supplier offers.

PPL Electric Utilities’ service territory includes 1.4 million customers, 1.2 million of them residential users. About 117,000 customers — just under 100,000 of them residential users — switched providers as of mid December.

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Consumers were promised a competitive retail electricity market that would restrain prices. The warnings that such a market would not develop went unheeded, but they turned out to be correct.

We’re told that today’s electricity prices are at early 1990s levels. That happens to be because prices at that time were off the chart for customers of utilities that invested in nuclear generation. Prices were trending downward by the mid-1990s, and they could have continued downward were it not for capping some rates at high levels in 1999.

Now Pennsylvania is approaching the end of the purported transition to full deregulation, with electricity monopolies still in place.

In the PPL service territory, that will mean a 30 percent rate increase for residential customers in January. Other utilities, such as PECO and FirstEnergy (including Met-Ed and Penelec), will go to full deregulation in January 2011.

rtunately, the governor and the General Assembly leadership are refusing to implement serious mitigation strategies to lessen the adverse impact of full deregulation.

Competition in electricity generation cannot happen because the profit margin on a kilowatt-hour of electricity is too small. That’s why the regulatory paradigm was created in the first place.

Utilities needed a huge customer base to make any money in this capital-intensive industry. The quid pro quo for their monopoly status was that they would guarantee reliable, affordable electric service. And except for where utilities opted for expensive nuclear power, that was what happened.

The state abandoned many consumer protections when it gave up regulating generation prices. Electricity generators no longer have to build plants or sell power to customers in their service territories, as they did under regulation.

This means fewer plants are being built in the state, and it could mean even higher prices. The problem is that a few utilities own all the generation capacity and have no serious competitors, so they can charge whatever the market will bear.

Deregulation proponents keep promising that a market will develop when the rate caps come off. But we saw what happened when the caps ended in the Duquesne Light service area in 2002: Not much.

There was a rate decrease due to the sale of Duquesne’s generating plants, but it has been virtually offset by subsequent rate increases. No competitors entered the Duquesne market, and customers have virtually no alternative supplier choices.

A couple of competitors have said they intend to offer service in the PPL service territory in 2010. However, these offers are likely to be limited to a relatively small number of customers at a discount too small to encourage customer switching. PPL’s monopoly status will remain unchallenged, and PPL Corp. (not PPL Electric Utilities) will pocket all of the 30 percent increase.

The biggest deregulation mistake was letting utilities sell their generating assets, often to wholly owned, unregulated subsidiaries. That has made it difficult to mitigate the impact of the coming rate-cap expirations.

However, there are, at least, two important measures state leaders should implement to ease the burden on ratepayers.

First, the Legislature should pass a law placing any newly built generation capacity under regulatory control. Over time, this would ensure that enough energy is available to meet demand at a reasonable price, forcing unregulated electricity suppliers to lower their prices.

Second, the state Public Utility Commission should open an investigation into costs claimed by the utilities. Before deregulation, utilities said the power plants they had already built would lose money in a competitive market.

To get them to support deregulation, the state permitted them to collect $12 billion in stranded costs from customers during the transition to deregulation. This figure was supposed to represent the difference between what the utilities spent on their generation assets and their worth on the market.

Now that we know what the actual market price for electricity is, the PUC can determine whether those generators were really uncompetitive. It’s likely that an investigation designed to true up the cost estimates will find that there were few, if any, stranded costs.

If that’s the outcome, the money should be refunded to ratepayers. A $12 billion refund could help offset rate hikes until other steps are taken to address the long-term consequences of the deregulation fiasco.

David Hughes is executive director of Citizen Power, a nonprofit advocacy group based in Pittsburgh. www.citizenpower.com

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More than 8 percent of PPL Electric’s 1.4 million customers have opted to buy discounted power from alternative suppliers, said Ryan Hill, the spokesman. The total includes 100,000 residential customers.

The end of state-mandated rate caps for the Allentown utility is expected to be a major test for deregulation in Pennsylvania. Customers of Philadelphia’s Peco Energy Co. won’t be able to shop around until the end of 2010.

PPL is is expecting many more customers to opt for alternative suppliers after Jan. 1, when the competition for customers is officially open. Already, five retail power suppliers are licensed to sell power to PPL customers, and they are offering discounts of about 10 percent to those who sign up for a year.

With the end of PPL’s monopoly on Jan. 1, rate caps will come off and the utility’s default rate will go up about 30 percent. The rate is based up power-supply auctions PPL held over the past three years. PPL’s rate for power will be 10.448 cents per kilowatt hour.

Alternative suppliers are able to buy power at current wholesale rates, which have come down this year in the recession. They are offering rates on Jan. 1 ranging from 9.38 cents to 9.52 cents per kilowatt hour for customers who sign up for a year. A customer using 1,000 kilowatt hours a month would save about $10.

PPL Electric Utilities will continue to be the sole distribution company in its territory, which covers all or parts of 29 counties in eastern and central Pennsylvania, stretching from the New York border to the Maryland line. It includes parts of Chester, Montgomery and Bucks counties, as well as Harrisburg, Lancaster, Williamsport and the Lehigh Valley.

PPL will continue to handle billing and customer service for the suppliers, and it will collect an additional fee of about three cents per kilowatt hour from all customers for distribution charges.

A comparison of the suppliers and their rates is available from the Pennsylvania Office of Consumer Advocate:

http://www.oca.state.pa.us.

By Andrew Maykuth

Contact staff writer Andrew Maykuth at 215-854-2947 or amaykuth@phillynews.com.

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HARRISBURG | Pennsylvania regulators Thursday approved a $30.16 million refund for residential customers of PPL Electric Utilities Inc., resulting from overcollection of a charge used to pay for infrastructure improvements.

The Pennsylvania Public Utility Commission voted 5-0 to approve the rebate. An average refund for a typical customer was not available.

These consumers will see the “transition charge” portion of their bill move from a charge to a credit.

PPL was permitted to collect a “competitive transition charge” following a state law in 1997 that authorized deregulation of Pennsylvania’s electricity market.

Law allowed PPL to recover “stranded costs,” which include infrastructure investments made before electricity was deregulated, because those costs could not be recovered in a competitive environment, the PUC said.

PPL also will refund $2 million to its industrial customers as part of the PUC decision.

In addition, the commission said PPL undercollected the charge from its small commercial and industrial customers by about $17.6 million, meaning those customers will continue to pay the charge in 2010.

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That talk is over.

Beginning Jan. 1, the 1.4 million electric customers of PPL Corp. can expect an average 30 percent increase in their bills if they don’t do anything. One year later, another 3 million-plus customers of Allegheny Power, Metropolitan Edison, Peco Energy and Pennsylvania Electric are likely to see rates jump higher, too.

Legislators did nothing but talk about requiring utilities to share the higher cost that is about to result from the expiration of deregulation-era rate caps. Those caps have, since the 1990s, protected most Pennsylvanians from paying the true cost of the electricity they use.

The Legislature’s inaction means ratepayers will have to be proactive if they want to slice anything off their bills.

For starters, that means shopping for a better price.

Pennsylvania’s 1996 deregulation law — which was supposed to usher in a competitive electricity market and bring down bills — allows electricity marketers to vie for customers. And it will be up to individual ratepayers to switch to suppliers that can resell electricity for less than the utility can when their rate cap expires and prices rise.

A switch could look seamless since electricity marketers can have agreements with utilities — which continue billing for the cost to maintain the wires that deliver electricity — to keep sending the bill.

Information on how to switch is on the Web sites of the Public Utility Commission and the Office of Consumer Advocate.

In addition, the Legislature passed a bill last year that requires the state’s 11 utilities to reduce electricity use — meaning ratepayers will see their utilities offering rebates on energy-saving appliances or light bulbs, home energy inspections and more.

For low-income households, there is more money than ever for weatherization projects — thanks in part to the federal stimulus bill — and utilities have various programs to help people afford their electricity bill or reduce their usage.

Another source of help was unexpected, if unwanted — the recession.

“Maybe the only silver lining from the terrible economic situation that we’re in is that energy prices have gone down,” said the state’s utility consumer advocate, Irwin Popowsky.

The Pennsylvania Public Utility Commission has data that shows how far energy prices have fallen.

Had the rate caps expired on June 27, 2008, the average increase in residential bills would have been 73 percent, according to the commission. Fifteen months later, on Sept. 30, it would have been 17 percent.

A year ago, Gov. Ed Rendell and lawmakers were warning that allowing rate caps to expire untouched would force businesses and factories to close and families to make tough decisions over how to pay all their bills.

The main discussion in the Legislature revolved around a plan to limit any annual electric rate increase over a period of a few years, preventing the utilities from immediately recouping the full cost of the electricity they resell.

Top legislators were divided over whether utilities should have been forced to swallow that loss. However, getting utilities to help foot the bill is not without precedent: Utilities in Illinois and Maryland gave back a combined $3 billion to consumers after rate caps there expired and caused an outcry.

Pennsylvania’s debate fell by the wayside.

On Thursday, Gov. Ed Rendell said he continues to press the Legislature for action and, although it is too late to help PPL customers, he warned that electricity rates may not be weighted down by the economy for long.

“We still need to do it, we still cannot rely on the fact that rates are low now and therefore there’s no immediacy to this problem,” Rendell said. “I believe that there’s a good possibility that prices could ramp up again.”

Marc Levy covers state government for The Associated Press in Harrisburg. He can be reached at mlevy@ap.org.

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