As Jim McLaughlin weighs the new dawn of electricity competition in the Philadelphia region, he's fighting some bad memories.
Years ago, when the long process of deregulation was in its infancy, Peco Energy Co. invited him to buy his power from an alternative supplier. McLaughlin doesn't remember the details, but he says the choice brought "negligible savings" for his home in Broomall. What he does recall is a hassle when the new supplier eventually went belly-up.
Now, as a slew of power providers is again vying for his business, McLaughlin may just stick with his familiar utility. "Even if I'm going to save a few dollars, it's just not worth the aggravation," says McLaughlin, a retired SEPTA transportation planner.
That may well be a reasonable decision for consumers who value simplicity over savings. But if you want to cash in on electricity choice, it's time to start paying attention again. More than a dozen years after Pennsylvania began to transform its electricity market, the real game has finally begun for Peco's 1.3 million residential customers.
You can stick with Peco, and pay about 5 percent more a month. You can switch to an alternative supplier, and perhaps even save some cash. What you can't do is turn the clock back to the era, pre-1998, when Pennsylvania power prices were totally regulated by the state Public Utility Commission.
So it's time to arm yourself with some facts, discard some misconceptions, and cope with the consequences of the decision years ago to restructure Pennsylvania's power markets. The following are answers to some key questions:
What happens after Jan. 1? Peco will still be your regulated utility, required as always to maintain the power lines and other equipment that make a modern electric system function. You'll still call Peco about outages, and Peco will still send you your bill.
The crucial differences will come on that monthly bill - and in your new opportunities and incentives to do something about it.
So is my bill going up? Yes and no, because several simultaneous changes push in opposite directions.
One line will finally vanish from your bill: the "Transition Charges" you've been paying under a 1998 settlement with the PUC, which authorized Peco to collect $5.26 billion for so-called "stranded costs" from the era when power suppliers were guaranteed a return on investments.
In other words, you're finally finished paying your share for Peco's costly investments in facilities such as the Limerick nuclear power plant. (Without the deal, state officials say, you'd have been paying off Limerick till the 2030s.)
But as a charge that added 2 cents to 3 cents per kilowatt-hour onto your bill for much of the last decade disappears, so do the price caps that Peco accepted in return. The caps kept the overall price of generation, including the cost of high-voltage transmission, at about 10 cents per kilowatt-hour. Together, those charges amount to roughly two-thirds of your monthly electric bill.
Without the cap, that price is actually ticking downward - despite years of warnings about double-digit increases.
If you stay with Peco, you'll now be charged a market price for power, set at 9.92 cents per kilowatt-hour through March and slated to adjust each quarter. The 5 percent increase you'll face in January is the result of regulators' decisions to raise Peco's distribution rate and its flat-fee monthly "Customer Charge."
How much can I save by switching? Some marketers are muddying the waters by saying that power prices are about to rise 30 percent - conveniently ignoring that Peco's generation charges were kept artificially low by the cap. Still, the potential savings are real, if modest.
Right now, some alternative suppliers are offering fixed prices, guaranteed for a year, that can save you more than a penny per kilowatt-hour vs. Peco's 9.92-cent price - formally known as its "price to compare."
The median Peco customer uses about 750 kilowatt-hours per month. At that level, a customer could save about $7.50 per month or $90 a year - more than offsetting Peco's projected $6 increase. Higher-end customers could save $150, $200, or more.
How do I find a supplier? You may get calls or direct-mail offerings, or even pitches from friends, neighbors, or relatives - some suppliers are using multilevel-marketing methods borrowed from companies such as Mary Kay.
Your best bet: See the Comparing Electricity Providers chart on this page or go to a reliable website like the ones maintained by the PUC (www.papowerswitch.com) or the Office of Consumer Advocate (www.oca.state.pa.us). Last week, each listed more than a dozen alternative suppliers.
Can I save more? It's possible that you can do better with a supplier that offers a variable rate, but watch out. For instance, Stream Energy, a multilevel marketer, posts a rate of 7.43 cents per kilowatt-hour - nearly 21/2 cents below Peco's price-to-compare.
But don't count on doubling or tripling your savings. Stream's price is a teaser introductory rate for a variable-rate plan, with price adjustments to be made "at the sole discretion of Stream Energy," according to its contract terms.
Are there other pitfalls? Cancellation fees concern some consumers, though they may be reasonable if a company offers you an attractive yearlong fixed price.
At least one provider, Gateway Energy Services, is offering a six-month rate. The drawback: You'll be shopping again at the start of summer, as air-conditioning pushes power prices to their peaks.
For the same reason, Peco's quarterly price-to-compare may rise then too, though its buying strategies are designed to shield customers from price volatility, says spokeswoman Cathy Engel.
The good news is that if you don't agree to a supplier's cancellation fee, there's no cost to switch again, or to return to Peco's open arms.
Another concern is that there are no alternative suppliers yet for Peco's 160,000 "RH" customers, who get special discounts in the winter for electric heating. Engel says the hope is that high-tech solutions will emerge for such customers before the RH rate is phased out in 2012 and 2013.
Peco is already promoting various high-tech ideas for cutting usage and peak demand - including its offer of a $120 annual discount to customers who allow the utility to cycle their air-conditioners on and off on summer's hottest days.
For more information, go to www.pecosmartideas.com.
A comparison of pricing per kilowatt-hour for the 17 alternative electricity providers. Graphic, C2.