As long-term price caps were about to expire a year ago, Peco Energy customers learned that cheap and abundant natural gas was easing the pressure on power prices and sparing them some long-anticipated bad news.

Customers who chose competitive suppliers were able to save about a penny per kilowatt-hour, offsetting a simultaneous increase in Peco's electricity-distribution rates. Rather than rise 10 percent or more, as widely predicted, the Philadelphia region's overall power prices basically held steady or ticked down.

But there was one group of customers who saw a shadow approaching, and now it's at hand. Starting Jan. 1, Peco's 140,000 electric-heating customers will lose half of their special residential-heating rate - the "RH rate" - discount. Come Jan. 1, 2013, the RH discount will vanish entirely - at least from Peco.

Those customers don't have many options at the moment. So far, no competitive supplier has offered discounts to compete with what will be left of Peco's price break. Nor is it guaranteed that any will do so by 2013.

But with the clock beginning to wind down, RH customers have good reason to start evaluating what few options there are - including the possibility of making a final break with electric heat.

Though it may seem ironic to those who recall the era when Peco and other utilities promoted all-electric homes, Peco itself is now eager to help, including with incentives to help pay for converting. So is Philadelphia Gas Works.

Here's a quick rundown of the costs, benefits, and uncertainties if you take either path: sticking with electric heat or switching to gas.

Staying put. If you're staying with electric heat, warm yourself with this thought: You'll still have a deep-enough discount that none of the 40 competitive suppliers in Peco territory is even bothering to make you an offer.

Right now, Peco's RH customers pay 10.98 cents for their first 600 kWh per month - a threshold designed to reflect their nonheating uses. Above that during cold-weather months, they pay 6.01 cents per kWh, a discount of more than 45 percent.

Come Jan. 1, the price-to-compare for the first 600 kWh drops to 10.05 cents at the same time that the RH discount is cut in half. Above that, Peco's RH customers will pay 7.78 per kWh.

Peco spokeswoman Cathy Engel Menendez says the net result will add about 5 percent to the monthly bill of an average RH customer, who now pays about $184 per month on year-round budget billing for average use of about 1,600 kWh.

Are those customers stuck forever without options? Not necessarily. But two tools that may eventually make competition seem more attractive - smart meters and so-called dynamic pricing - are still on the horizon.

Peco expects to start installing the computerized meters in February on a multiyear timetable, although customers can get them ahead of schedule for a $17 fee. With them, either Peco or a supplier could share savings that come when customers shift usage to avoid peak-demand periods — particularly summer afternoons, when air-conditioning demand soars, but also late winter afternoons, when heating demand coincides with businesses' having to turn on more lights.

It's possible that some suppliers may offer discounts to electric-heat customers before smart meters are installed, since demand for home heating tends to rise overnight and in the morning. But so far, there's no sign any are taking that step.

The closest may be Direct Energy, which offers "Free Power Saturday" to PPL customers already equipped with smart meters, encouraging them to shift as much appliance use as possible to that low-demand day. "We're looking at all sorts of other options to roll out," says spokeswoman Bethany Ruhe, "but there's nothing firm yet."

Switching to gas. Much of the power you're buying nowadays is generated by turbines burning natural gas. Why not cut out the middleman, and eliminate the waste that comes from burning an excellent heating fuel to generate electricity just to heat your home? Both the environment and your budget will benefit.

Converting isn't an option for everyone, says Merie Pisieczko, manager of PGW's conversion program, who says geological characteristics sometimes make gas service impossible. "There are parts of Roxborough where it's all rock, and we can't blast to install a main," he says.

But where terrain isn't an issue, the chief challenge is gaining access to a main. And you may be surprised by how little it costs - or how much your utility is willing to help.

Under Peco's "Gas Along the Main" program, which promotes gas conversions, the average cost of laying new pipe is about $3,000, but incentives and credits can cut that by two-thirds. PGW offers similar deals.

Some customers pay nothing, such as a customer with a 2,500-square-foot home that's within 150 feet of a main, Engel Menendez says.

Incentives are also available for purchasing a gas furnace or boiler - enough, perhaps, to knock 25 percent off the cost of a $6,000 high-efficiency boiler.

So is low-interest financing, via the Philadelphia Home Improvement Loan program and the Keystone Home Energy Loan Program. The city program offers 3 percent loans to those who qualify based on income, and 5 percent loans to all comers.

What's the payoff? Pisieczko has numbers at his fingertips for oil-heat customers weighing conversion. He says today's natural gas prices equate to paying $2.06 per gallon of heating fuel. "If oil is $3.50 per gallon, there are big fuel savings," he says.

And compared with electricity? Even with Peco's full RH discount, you can probably save 40 percent to 50 percent by heating with gas at today's prices.

Contact columnist Jeff Gelles
at 215-854-2776 or jgelles@phillynews.com.