New Pennsylvania Bill Proposes Changes to Deregulated Energy Market

Deregulation No Longer In Consumer Hands

Pennsylvania deregulated its energy market in the late 1990s, giving consumers a choice between purchasing energy supply from a retail energy supplier or default service from their utility. But a new bill may change the system, eliminating the utility's ability to sell energy supply. Instead, Pennsylvania residents would be forced to switch to a retail supplier.

The bill, submitted by Sen. Bob Mensch, a Republican from Montgomery, states that consumers who don't choose a retail supplier by June 2015 would be placed in a competitive auction in which retail energy suppliers could essentially purchase the right to provide energy supply to a customer. Those who default to retail supply would be enrolled by a retail energy provider in a 12-month fixed-rate energy plan with rates approved by the Pennsylvania Public Utility Commission.

However, customers don't have to remain on the defaulted plan for the entire 12-month period. Since these customers won't sign a contract they are allowed to switch to a different supplier or plan option at any time without penalty.  And, of course, Pennsylvania customers can choose their own retail energy supplier before the law goes into effect.

Though consumers may not like the idea of being forced to purchase energy from a retail supplier, the state stands to make a pretty penny from the legislation. As the bill reads today, retail suppliers will be required to pay the state $100 per customer who defaults to their service. With more than 3.5 million customers still receiving utility energy supply in Pennsylvania, the state has the potential to earn millions if the bill passes.

And the state wouldn't have to spend its money to inform the public of any changes to the law, either. Each retailer would have to pay an additional $2 per customer to fund educational programs about the new energy system.

Proponents say the bill would not only benefit the state, but it would keep money in the pockets of consumers. If the bill passes, retail suppliers would be required to give each customer a one-time $50 credit.

According to Direct Energy, switching to a retail supplier instead of sticking with the utility rates can save customers money. The retailer says PECO customers pay more for utility rates—about $162 more per household per year—than some of those offered in the competitive market. By signing up for the lowest 12-month fixed rates, customers statewide could have saved more than $357 million in 2012.

It seems like utilities might be in support of the bill as well. Deregulation legislation in Pennsylvania today mandates that a utility only make money off of the delivery of electricity or natural gas. The rates it charges for energy supply simply cover the expense of purchasing or generating energy. Its rates are regulated by the Public Utility Commission, which ensures that the utility doesn't profit off the sale of power or natural gas.

PPL, a utility that serves 1.4 million Pennsylvanians, has not taken an official stand on the Mensch bill. However, spokesman George Lewis told The Morning Call that the company would like to do away with default service. He said moving the requirement of default supply away from utilities allows them to focus on maintaining the energy infrastructure and ensuring reliable delivery service.

Of course, PPL also has a retail arm, PPL EnergyPlus, that competes in the energy market. EnergyPlus, like all retailers, is able to make a profit from the sale of energy. And PPL People for Good Government, PPL Corp.'s political action committee, has already donated $4,250 toward Mensch's campaign in 2013.

Though there is some support of the legislation, it has plenty of opposition, too. AARP, for example, has taken a stand against the bill, saying it creates unnecessary hardships for seniors and the poor. Since the energy marketplace exists mainly online, it will be difficult for seniors and those without Internet to navigate through the options and find a good deal on energy.

Others argue the bill doesn't answer serious questions, such as what will happen if a retail supplier goes out of business or how poor credit customers can find reasonable rates for energy.

The bill still needs approval from both houses of the state's General Assembly and the governor's signature before it becomes law. In the event of opposition to this legislation, which Mensch believes is likely, the Assembly can subject the bill to committee hearings.

The bill is likely to change as it makes its way through the legislative process and lawmakers address any public opposition. Hopefully, the final version will be a compromise agreeable to both sides, leaving Pennsylvania with a law that benefits everyone.


Paul Batistelli is a co-contributor on this piece. He freelances in the energy field for the promotion of a greener society and energy means. He works to raise awareness on ecological issues, energy dependency, and reducing carbon footprints.

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