Electric Choice in Pennsylvania

What is deregulation?  Deregulation of the electricity market is now a reality in Pennsylvania and that is a good thing for consumers. Deregulation means the chance for competition and a free market and competition means lower prices and better service for Pennsylvania energy customers. Before the deregulation act, officially called the “Electricity Generation Customer Choice and Competition Act”, passed, Pennsylvania energy customers only had one company to choose from for their electricity needs. Since you cannot pick up and move your home, the area you lived in commanded which Pennsylvania power company you purchased your electricity from.

But that was the old system and it has now ended with deregulation. The problem with the old system was that with no competition, one company was in charge of generating, transmitting and distributing the electricity. Since this constituted a monopoly, add the fact that monopolies are against the law, the government was forced to regulate the industry to make sure that customers were charged a fair price for the service. But regulated or not, you still had only one company that was the sole proprietor to provide electricity to your home or business – you had zero choice.

With no competition, power companies could decide that services should and should not be provided and what facilities were necessary. Customers had zero influence on the market unlike most things in our capitalist system where customers can vote with their checkbooks and let companies know how they feel about their policies by switching. Now that there is competition in the system, customers can do just that. The local Pennsylvania power utility is still responsible for the delivery of electricity but consumers can choose their electricity generation supplier.

The deregulated market will be every bit as reliable as the old monopoly but with the added advantage of customer choice. This truly makes it a superior system in comparison with the old regulation model. Customers will find that their same old local company will be responsible for the local infrastructure maintenance and any problems, like downed power lines or power outages. They will also handle any billing problems or complaints. Customers will also have reliable power delivery because if for some reason the company they select cannot provide the power, the local company will be obligated to step in and handle the need as the “provider of last resort.” That way a customer cannot be cut off from the grid, no matter who their power company is.

Here are a few definitions that will help you as a consumer better understand the information you encounter about the deregulation issue:

Electric Distribution Company: This is the company that has the wires connected to you house. More than likely they will be the same company you had before the changeover. This company handles all delivery of electricity, maintenance of the lines, meter reading, as well as service connection and disconnection as well as upgrades.

Electric Generation Supplier Company: This is the company that creates and transmits the electricity to the grid so your local electric distribution company can deliver it to your home or business. This company is also known as the alternate supplier. There are also electricity brokers who fill this role. Customer’s fees are no longer regulated so the competition in the marketplace will set the prices.

Unbundling of Electric Services: The deregulation legislation forced electrical companies to unbundle their customer fees in to four different parts: distribution, transmission, generation and transition. This allows customers to choose different providers for each of these services except the distribution which has to be handles by the local company.

Billing Cycle: This is the time spanning from one meter reading to the next -  Usually this span is one month although it may technically be calculated by a certain number of days.

Tariff Rates: The rates changed for electricity by the Electric Distribution Company.

One Bill Option: The Electric Distribution Company will provide the customer with a single bill that will also include the charges from the Electrical Generation Company. The bill will note the separate charges in separate sections and will make note of the other company’s name. Having only one bill is more convenient for customer’s to pay and also makes it easier for them to keep track of their total electricity expenses.

Two Bill Option: If customers choose an alternative generation supplier and choose the two bill option, then they will receive separate bills from both the generation company and the distribution company.

Electrical Commodity Price: Electricity is now a commodity because there is a market and competition to provide it. It is controlled by the forces of the market at the retail level. Price changes will be much more frequent as generation suppliers and brokers will be keeping a close eye on the cost of creating electricity and attempting to offer the best price at that time to attract more business.