Peco Energy Co. will substantially decrease its supply charges on July 1, just in time for the summer cooling season.
The Philadelphia utility says that residential generation charges will go down about 12 percent from current prices. Commercial customers will see even bigger reductions, about 13 percent for small businesses and more than 19 percent for medium-sized commercial customers.
The price estimates, which Peco submitted to the Pennsylvania Public Utility Commission on Monday, are the latest evidence of how consumers are benefiting from record low prices for natural gas, which is used to generate electricity.
While gasoline prices are higher this year because of the rising worldwide price of a barrel of crude oil, natural gas prices are moving in the opposite direction. Natural gas prices are set by a domestic market that is oversupplied because of low demand from the mild winter and an abundance of production from new sources, such as Pennsylvania's Marcellus Shale formation.
Natural gas prices have fallen so low that producers are dramatically slowing down their drilling programs to reduce the oversupply.
Peco's "price to compare" for residential customers will go down from 10.06 cents per kilowatt hour to 8.87 cents on July 1, the lowest generation charge since market rates came into effect in January 2011. For a customer using 900 kilowatt hours a month, the reduction amounts to a savings of about $10 a month.
In Pennsylvania's competitive energy market, customers are free to switch electrical suppliers, some of whom have reduced prices in recent months to less than 8 cents a kilowatt hour. But Peco's estimated July 1 rate is now lower than the prices currently offered by 17 of 40 alternative suppliers listed on the PUC's website, increasing pressure on alternative suppliers to cut prices to stay competitive.
The "price to compare" covers only generation and transmission charges and accounts for about two-thirds of a customer's bill. All customers pay a distribution charge to Peco regardless of who supplies their power.
About 27 percent of Peco's 1.6 million customers have switched suppliers, according to the PUC.
New Jersey and Delaware electrical customers can also choose electrical suppliers, though regulators in those states are not promoting competition as energetically as the Pennsylvania PUC.