Jim Mancini is one of the 31,000 residential electric supply customers that Duquesne Light Co. lost over the past five months.
still pays the Western Pennsylvania utility to transmit power to his
home in Moon. But since December, Mancini has been buying electricity
from FirstEnergy Solutions and saving roughly 10 percent compared with
Duquesne Light's rate.
"Utilities don't have any incentive to
find the lowest cost" power for their customers, he said. "That's why I
felt more comfortable signing with an alternate supplier."
Public Utility Commission Chairman Robert Powelson wishes more people
would drop their local electric utility's standard, default service and
pick one of the lower-cost competitors that are increasing in number
"That's what is frustrating me right now," said
Powelson, a commission member since 2008. "Why would you pay the
default rate, when you can make a change and save a lot of money? The
five-member PUC is looking at ways to make Pennsylvania's retail market
for power more competitive -- including eliminating, or changing, the
utilities' default service that most households use now.
deregulated its electricity market in 1996. But utilities continued to
sell power at capped rates for several years, so few alternate
suppliers moved in to try to capture residential customers.
changed somewhat in the past year as the last of the caps ended. Still,
"Pennsylvania has a good retail market, but it's not a great model,"
Powelson said, "and that's because when you have the wires and poles,
companies providing a backstop product the way it is now, it's going to
take a long time" for customers to realize they have choices.
commission is questioning whether default service should continue in
its current form, with each utility setting a benchmark price. The
Legislature would have to approve big changes, such as allowing
alternate suppliers to set default prices and ensure reliable service
in a utility's service area.
Duquesne Light Co. started its latest default plan in January, raising average customers' monthly bills by about $4.
Downtown-based utility has had high numbers of "shopping" customers
since deregulation began. But 31,000 more left this year to sign with
one of 13 competing suppliers, CEO Richard Riazzi told the PUC as part
of its investigation. About 30 percent of Duquesne Light's residential
customers, or more than 144,000, now buy power elsewhere.
utility and others statewide don't make money on selling power. Its
parent, privately held Duquesne Light Holdings Inc., makes a profit
through a procurement business that buys the power, spokesman Joseph
Vallarian said. Duquesne Light earned $350 million last year on revenue
of $1.13 billion, according to a report by Duet Group, which owns a
stake in the company.
"Customers like having a fixed rate for a
set amount of time, so they know what they'll be paying," Vallarian
said. "Shopping is working in our territory. The numbers back that up.
If it's not broke, don't fix it."
Tyrone Christy, a PUC member,
said throwing away default service now would be a mistake. "We just
came off the rate caps," he said, and customers still are learning how
Utilities that sell power for what they pay are giving
customers who choose not to shop a reasonably priced, steady product,
Citizen Power, a Squirrel Hill-based consumer
advocacy group, agrees. "Many (alternate suppliers) weren't offering
service a year ago. Some may not be offering it a year from now," said
Titus North, the executive director. "If their sales plans don't go
well, they could just fold up the tent."
acquisition this year of Greensburg-based Allegheny Energy Inc. created
the state's largest utility with more than 2 million customers, and
spurred the PUC investigation, Powelson said. Utilities, at the very
least, need to better promote competition, while focusing more on
providing reliable service, he said.
frequently point to Texas as a good example of a fully competitive
market, with more than 25 residential suppliers -- and default prices
that are set so high, virtually no one uses them.
household in Texas, from big homes to apartments, makes an active
choice as to their supplier and their product," said Jim Steffes, vice
president for Direct Energy's residential business. "That forces us not
only to drive costs down to the fairest level, but to constantly
innovate new solutions."
Pennsylvania's current system lulls
customers into paying their utilities for power, as they may have done
for decades, Direct Energy and other suppliers contend.
Competitive suppliers point out several problems with the system:
Once a customer decides to switch, it may take 45 days for the change
to take effect. That's because state law prevents changes during the
middle of a billing cycle. In Texas, a customer can start buying power
from a new supplier within a day.
-- Utilities send letters to
customers confirming that they've decided to switch and giving them 10
days to reconsider, but language in some of the notices might make
customers question their decisions, FirstEnergy Solutions spokeswoman
Diane Francis said. "There may be a better way to handle the process,"
-- A customer who switches to an alternative supplier,
then moves across town, must return to the utility for one billing
cycle before switching again, Steffes said
Pennsylvania, we believe, is pretty strong," Francis said, but a few
enhancements could spur competition. FirstEnergy Solutions has enrolled
"thousands" of customers in recent months, mostly in Western
Pennsylvania customers could benefit from offers used elsewhere, the companies say. Here are examples:
Local officials in Ohio and some other states can negotiate favorable
rates for an entire community. The deal might be 6 percent off the
price to compare, said Francis of FirstEnergy Solutions, which just
signed up its first municipal deal in Illinois.
-- Groups of
customers in some states can lower their rates through "descending
clock" auctions. Power suppliers agree to a high price, then lower
their offers until a bottom price is reached.
Starting with the
PUC's look at the market, "We have a real opportunity to finish the
vision that was laid out in 1997" by then-Gov. Tom Ridge, who advocated
deregulation, Steffes said.
Recent surges in shopping in Duquesne Light and other utilities service areas aren't enough, Powelson said.
percent shopping is not good," he said. "Really, it should be upwards
of 70 or 80 percent." The PUC will hold the last of three hearings in
its investigation late this year, and make a report early in 2012.