Consumer alert: Electricity-price discounts heat up

A full-scale price war has broken out for Peco Energy Co. electricity customers as prices have hit their lowest levels since market rates came into play a year ago.

Some competitive suppliers are offering residential discounts of up to 20 percent off Peco's price-to-compare, the rate that customers pay if they do not switch to an alternative supplier.

For customers who lock in for the fixed-rate deals, the discounts should become even bigger after March 1, when Peco's price is projected to increase slightly.

Competitive suppliers say the reason for the price decline is simple: Natural gas prices have plummeted this winter to their lowest levels in a decade because of abundant supply and warm weather. Gas is used to generate electricity, and low fuel costs translate into cheap electricity.

"It's all that good shale gas you guys are sending us from Pennsylvania," said Mike Perna, vice president of marketing and business at ConEdison Solutions, referring to the Marcellus Shale boom that has driven down gas prices.

ConEdison has dropped prices 10 percent in the last month to 8.15 cents per kilowatt-hour, fixed for 12 months. That is 18 percent below Peco's current price of 9.92 cents per kilowatt-hour.

Alphabuyer.com, a group-buying company in Paoli that aims for the best current market price, is offering rates as low as 8.1 cents per kilowatt-hour from Amerigreen, a Pennsylvania supplier. As with the ConEdison offer, the price is fixed for 12 months and includes no early cancellation fee.

Another supplier, Energetix Energy Services Co., is offering a 12-month fixed rate of 7.927 cents per kilowatt-hour, but its deal includes an element of risk - a $35 fee for customers who cancel before the end of its term.

A typical residential customer uses about 9,000 kilowatt-hours a year, so a two-cent discount would amount to annual savings of $180.

Prices have dropped so quickly that they have overtaken offers that companies such as Energetix included in recent mailings.

"In a normal pricing environment, the price doesn't really change all that much that quickly," said James DiStefano, the Energetix chief operating officer. He said the company would honor the lowest prices available to customers who respond to the direct-mail offers.

Under Pennsylvania's law establishing electric choice, customers are free to shop around for alternative suppliers of electricity. Regardless of who they choose, Peco Energy Co. remains the distribution company, responsible for billing and customer service. Peco makes its profit from the distribution charge.

The aim of the law was to introduce competition into the generation side of the business. Suppliers have responded by offering variable or fixed-rate deals at a discount. Some offer green-power packages that allow customers to buy some or all of their electricity from renewable sources such as wind generators.

New Jersey customers can choose electrical suppliers as well, though the market is not promoted enthusiastically as it is by Pennsylvania regulators, which lists comparative prices at its website, www.papowerswitch.com

Suppliers say they are more nimble to take advantage of opportunities in wholesale power markets such as the current decline. Peco's default rate is adjusted quarterly, and by regulation it is based upon a basket of power-supply contracts that protect customers from large price swings.

Since electric choice began in 2011, 26 percent of Peco's 1.6 million customers have switched, according to the Pennsylvania Public Utility Commission.

David Fein, president of the Retail Energy Supply Association, said the price war was "very positive, from an industry standpoint. We're not debating whether competition works. The proof is in the pudding."

Some competitive suppliers owned by major national energy companies say they are able to hedge current prices with supply contracts. Some smaller suppliers may only offer variable rates, which shift monthly, depending upon market fluctuations.

Some suppliers appear to be pricing their products aggressively to capture market share, and then subtly increasing prices when the initial terms expire. Customers who signed up during the first months of electric choice last year are now up for renewal, so they are advised to review their bills.

DiStefano of Energetix, which is affiliated with Rochester Gas & Electric Corp. in New York, said his company was not losing money even though it had dropped prices 13 percent since November.

"We're used to operating in a lower-margin market," he said. "We're not throwing out loss-leader prices."

Energetix shook up markets in January when it was the first supplier to offer a choice to Peco's 160,000 residential heating customers, who currently enjoy a discounted rate that the utility is phasing out this year.

• Chart: Comparing Pa. electricity suppliers

• Peco Energy Co. responds to customer questions at http://www.pecoanswers.com

• Pennsylvania's Public Utility Commission explains electrical choice and lists alternative suppliers at http://www.papowerswitch.com

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

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