After switching from Peco, one customer sees the danger of a variable rate

Linda Peterson of West Chester was eager to switch from Peco Energy Co. at the end of last year. She signed up for an alternative electricity supplier offering a variable rate that would fluctuate depending upon market conditions.

As Peterson discovered, variable rates sure can vary.

For a few months this year, Peterson's rate was very attractive, indeed. But it went up 58 percent from May to June. At 15.63 cents per kilowatt hour - that's just the generation charge - her last bill was about $23 more than it would have been had she stayed with Peco.

"I knew there would be some variation, but that's just a huge, huge increase," said Peterson, who is semiretired.

A representative from her supplier, Palmco Power PA L.L.C., did not return a phone call about Peterson's bill. But its customer-service department, in an unsigned e-mail, blamed an "unusual" wholesale price spike for the increase.

"Thankfully, however, shortly after the wholesale price increase, wholesale prices dropped, and our price billed to our customers dropped accordingly," it said.

In Pennsylvania's buyer-beware world of deregulated utilities, Peterson can't do much but switch to another supplier. Her agreement, like most with variable rates, does not carry an early cancellation fee.

According to the state Public Utility Commission, a supplier can bill a variable-rate customer at whatever price it believes the market will bear, even if the customer originally thought he or she was getting a discount.

A company also can offer different rates to different customers. The variable rate that is on a customer's bill does not have to be the same as the initial price posted on the PUC's website, http://PAPowerSwitch.com.

"A supplier could have one rate for PowerSwitch . . . while offering a different rate door-to-door . . . yet a different rate for enrolling by mail," Denise McCracken, the PUC's spokeswoman, said in an e-mail. "They could offer me one rate . . . my neighbor a different rate (as long as they are not discriminating on the basis of race, gender, etc. of course)."

In Pennsylvania and New Jersey, where dozens of electrical suppliers are competing, customers accustomed to a lifetime of regulated utility prices now face a dizzying array of choices - fixed rates, variable rates, and "green" rates from renewable-power generators. Next year, Peco customers will begin seeing rates that vary hourly, according to the market.

More than 20 percent of Peco customers have switched since Jan. 1. But despite promises of savings, most residential customers seem unwilling to leave the protective comfort of the regulated utility.

On Monday, the Retail Energy Supply Association launched a campaign to educate customers about the benefits of switching, but it faces headwinds generated by customers such as Peterson, who share their experiences.

"My neighbors are very scared about switching," said Peterson, a clinical social worker with a small private practice.

Peterson was an early adopter of electricity choice. She had switched suppliers in the late 1990s, when limited deregulation was introduced into the Peco market. Competitive suppliers eventually pulled out because they could no longer beat the utility's capped rates. But when Peco's rate limits were lifted at the end of 2010, competitive suppliers returned en masse.

Peterson signed up with Palmco, the marketing arm of a Brooklyn fuel-oil dealer, which posted a price on the PUC's website. She liked the company's low-key marketing, compared with the blustery direct-mail appeals she received from bigger suppliers.

"The fact that they weren't doing a lot of heavy marketing, I guess I trusted them a little," she said. "I didn't expect them to escalate the price like that."

According to a review of Peterson's bills, Palmco's rate was very generous during the first few months. It charged her an introductory rate of 5.78 cents per kilowatt hour, clearly a below-market 42 percent off Peco's rate. But by May, Palmco's rate had increased to 9.91 cents - just about the same rate Peco was charging.

And then in June came the whopping 58 percent increase - to 15.63 cents per kilowatt hour. Peterson averages about 475 kilowatt hours a month.

The owner of Palmco, Robert Palmese, did not return a phone call. But his company's customer-service department offered this response:

"Our family has been in the energy business since 1938, 73 years. We know from experience that it is always in the best interest of our customers to keep prices for energy as low as possible."

In an interview in October, Palmese offered reassurance to customers who might consider his company.

"We have very casual marketing," he said. "We'd like our customers to like us. Just try us, you may like us.

"You are always free to leave."

The PUC explains electrical choice and lists alternative suppliers at http://www.papowerswitch.com.

Pennsylvania's Office of Consumer Advocate will mail a Peco shopping guide for free: Call 1-800-684-6560.

Peco Energy Co. responds to customer questions

at 1-800-494-4000 or http://www.pecoanswers.com.EndText