Pa. House panel hears of pain from variable-rate power bills

Last year, Matthew Morgan wanted to save money on his electric bill, so he went to the Pennsylvania Public Utility Commission's website to shop for a power supplier.

Among the long list of offers on papowerswitch.com, the North Coventry resident found an attractive variable rate from Great American Power L.L.C. Morgan figured the company was licensed by the PUC. What could go wrong?

The polar vortex, it turns out.

In February, Morgan's rate more than doubled. The savings he hoped for were wiped out in one $400 bill.

"I feel I got set up by the Pennsylvania PUC," he said. "The PUC was in effect the marketing arm of these companies."

Morgan is among thousands of Pennsylvanians who were blindsided by high electricity costs brought on by the severe winter. They are looking for answers.

At a hearing on variable rates Thursday before the Pennsylvania House Consumer Affairs Committee, experts testified that extraordinary market conditions caused such dramatic price swings in January that anybody who had not nailed down a fixed rate was vulnerable to a price shock.

The PUC said it has stepped up warnings on its website about the risks of variable rates, and wants to force suppliers to more clearly disclose the fact that many variable rates include no limit.

Tanya McCloskey, the state's acting consumer advocate, said consumers - some of them subjected to intense sales pitches by suppliers - can't be blamed for not understanding their bills could double, triple, or quadruple because electricity markets were having a bad month.

"I do not believe that it can be fairly suggested that a residential consumer could have, or should have, been aware that they were taking such a significant risk," she said.

McCloskey said she had heard from single parents, churches, and elderly people whose bills soared up to 600 percent. Some were hit with bills in excess of $2,000 that they can't afford.

"The public response from consumers impacted by these variable-rate plans has been overwhelming," she said.

The PUC and Attorney General Kathleen Kane are collecting complaints.

State Rep. Robert Godshall (R., Montgomery), the chairman of the Consumer Affairs Committee, has initiated legislation that would cap the amount a variable rate could increase. He also wondered if some suppliers had illegally "fleeced their customers."

"We must put caps on variable-rate increases and require the industry to put language in their customer contracts that warn consumers about the nature of variable rates," he said.

The fallout from the price spikes has shaken confidence in Pennsylvania's electric choice program, under which 2.2 million customers have switched to a competitive power supplier, usually at a discount price.

In the last two weeks, about 8,000 customers have switched back to default service from local utilities like Peco Energy Co.

PUC Chairman Robert F. Powelson said the commission wants new rules requiring suppliers to more clearly disclose the terms of their variable rates, including historical prices.

The PUC has also initiated a procedure to allow customers to switch suppliers in three days, rather than the 11 to 40 days the process now takes.

"I don't want customers stuck on these products for another billing cycle," he said.

One immediate casualty of the public backlash is the industry-supported Senate Bill 1121, introduced last year by Sen. Bob Mensch (R., Montgomery), that would have gotten incumbent utilities out of the default supply business, and would have auctioned to competitive suppliers all customers who had not already switched.

The bill was opposed by the AARP, which argued that even though customers would be switched to fixed-rate terms, many would eventually lapse into variable-rate deals and be at the mercy of the market.

Mensch said in a recent interview he was rewriting the bill, saying public outrage over rates had "complicated" the debate.

McCloskey, the consumer advocate, suggested the state should end the practice of switching fixed-rate customers to variable rates at the end of their terms. Many customers complained they did not notice they were switched over to a variable rate until it was too late.

McCloskey also urged regulators to force suppliers to improve their customer service. Some suppliers have been granting rebates to unhappy customers. Others have not been picking up the phone.

"We had numerous callers who informed us that they had three-hour waits just to speak to a supplier's representative," she said.

Morgan, the North Coventry resident, said he would like to talk to his supplier, Great American Power. The company touts its Pennsylvania roots on its website, though it is run out of Georgia.

But Morgan said his messages went unanswered.

So did multiple calls from The Inquirer.