More than a decade ago, Pennsylvania's lawgivers deemed it wise to deregulate the utility industry. Here are some observations on what the guardians of the public interest have wrought, based on the perspective of one Penn Power customer.
An alternative purveyor of electricity recently gave select Penn Power customers in Western Pennsylvania the opportunity to purchase electricity for 6.85 cents per kilowatt hour through May 2011. As someone who used a tad more than 1,000 kilowatt hours over the most recent monthly billing period, the offer represents savings of roughly 2 cents per kilowatt hour, or 30 percent.
That's the kind of significant savings envisioned by competition's crusaders.
This triumph of free market economics was made possible by FirstEnergy Solutions, whose offer to Penn Power customers expired Wednesday. FirstEnergy Solutions is the merchant power arm of Akron, Ohio-based utility FirstEnergy. That connection may seem odd to observant Penn Power customers who have seen this statement at the top of their monthly bill: "Penn Power, a FirstEnergy Company."
Which raises the question: Is this competition, or two family members fighting over the same piece of pie?
David Hughes says the family feud "describes the craziness of the whole system." Mr. Hughes, who has opposed deregulation since the dawn of the new era, is executive director of Citizen Power, a consumer advocacy group.
"It's really laughable that deregulation proponents can proclaim there's competition," he said. "The bottom line here is the money all goes to the same shareowners."
Deregulation separated the companies that generate the electricity from those that deliver it. Penn Power, Duquesne Light and other utilities continued delivering the electricity, but consumers could buy electricity from whomever offered the best terms. If they didn't shop, the company that delivered their electricity would buy it for them at auctions and charge them default rates blessed by the state Public Utility Commission.
At first, there was a proliferation of power providers. But many of them left the market, and competition was not as robust as deregulation's advocates had hoped. That is reflected in the amount of electricity Pennsylvanians are buying from alternative suppliers.
As of April 1, the amount of power residential, commercial and industrial customers were buying from alternative suppliers was 31 percent below levels of a decade ago, according to the Pennsylvania Office of Consumer Advocate. The number of business customers -- who account for about 80 percent of electricity consumption -- shopping around is down. The decline has not been offset by a 7 percent jump in the number of residential customers shopping for the best deal.
"If this is the best that can be achieved after 11 years, I think it's clear electricity doesn't lend itself to the volatility of the marketplace," Mr. Hughes concludes.
Advocates of deregulation -- and there are plenty of them -- document that shopping is on the rise. Some of that has been spurred by the demise of rate caps regulators maintained to ease the transition to a free market. That phenomenon has been tracked by the Compete Coalition, a Washington, D.C., group that backs deregulation.
The group reported in January that less than a month after the elimination of rate caps for PPL customers, nearly 20 percent of that utility's customers had switched to other suppliers, lured by discounts of up to 10 percent. According to Pennsylvania's Consumer Advocate, 28 percent of PPL's customers were buying electricity from someone else in April vs. just 4 percent a decade ago.
Based on the jump in shopping here and developments in Ohio and other states, "this steady drumbeat of increasing competitive shopping rates in competitive retail markets continues [to] demonstrate that our nation's competitive electricity markets" are benefiting consumers, Compete blogger Joel Malina wrote last week.
The statements of Mr. Hughes and Mr. Malina notwithstanding, this Penn Power customer can't help but take pause at the fact that two arms of FirstEnergy are vying for his business. Evidently, competition is not only good for the goose, it's good for the gander.
"It's not an easy concept," said FirstEnergy spokeswoman Diane Francis.
Ms. Francis notes that when Penn Power secures electricity for customers who don't shop, it negotiates multiyear deals. Prices can change over the time period, allowing FirstEnergy Solutions and other power merchants to offer consumers more favorable terms, she says.
Currently, the only non-FirstEnergy option for Penn Power customers who want to pay less is Dominion Peoples Plus. (There are options to pay more for those who want to subsidize wind and renewable energy).
One final word: As a demand meter customer, my bill is based on a two-tier Penn Power rate structure designed to encourage energy conservation. FirstEnergy Solutions is offering a flat rate, meaning my last kilowatt hour will cost no more than my first.
In this feud between two FirstEnergy siblings, I wonder which child Mom likes best?