In discussing the best time to lock in fixed business electricity rate contracts, there is a wide misconception that fixed electricity rates go down during the fall and spring season of the year. While recent historical data may lead one to believe this may be the case, following this to an end in itself is a fallacy and can cost businesses money as they sit around and wait for prices to potentially fall.

Fixed electricity pricing is based on future forward contracts. With natural gas being a significant source of electricity generation in Pennsylvania, fixed rates are highly correlated with natural gas future contracts. This means that when you look to lock in a two year fixed electricity price, the forward natural gas prices for the next 24 months have an effect on the final fixed price for power. Every month included in the duration of the contract will have a set rate the moment the contract is signed. The final fixed price will be the weighted average of the estimated amount of electricity a business is expected to use for a given month times the rate. This means if a Pennsylvania business customer decides to lock in a fixed commercial electricity rate in the middle of summer the price will take into account the cooler months that come along with the fall and spring seasons.

Locking in a fixed rate will protect Pennsylvania business customers from the volatility associated with the energy market. The fixed rate will put a ceiling on the price if the market were to rise during the term of the contract. If the market were to drop you are not necessarily stuck with having to pay a higher rate. More and more electricity suppliers are offering the blend and extend option in Pennsylvania. This allows a business electricity customer on a fixed rate product to immediately lower their rate at any point during the term of the contract in return of extending out the contract. Exercising this option will maximize the savings for the initial term of the agreement while extending out protection against the risk of a potential rise in future energy prices.

Fixed rates are the most common rate structure for those looking to get off PPL, Met-Ed, or PECO’s high default rates. One appealing feature of fixed rates is the transparency in allowing a company to forecast their annual electricity expenditures. Those businesses still on the utility default rate will have to deal with large swings in costs when the electric bill comes due. Budget certainty is a great asset to have when dealing with a volatile market. With the blend and extend option in place, Pennsylvania business customers looking to sign a fixed rate may want to consider locking in a term for several years.

Electricity choice in Pennsylvania allows for alternative power companies to solicit customers who previously did not have choices when it came to who do buy their power from. The program seems to be working as more power companies continue to offer service in the state, resulting in lower electricity prices for energy shoppers.

Electricity customers can compare several rate offers at electricity comparison sites designed to help consumers compare electricity rates, as well as learn about energy choice and current default price structures.

Energy consumers who do not select an alternative supplier pay a default rate with their local utility company (PECO, PPL, Duquesne). The default rates – price to compare – are based on a series of auctions that have previously been held. Choosing a lower priced supplier simply means a lower monthly electric bill, from the same local utility company. Energy choice seems to be working as prices continue to fall, companies expand, and customers adopt to their new choice by shopping. It is becoming more difficult for incentivized politicians to argue against the Compete Coalition, an organization who supports nation wide energy choice programs.

PPL electricity customers continue to find savings on their electricity bills.

Since capped rates expired at the beginning of the year, more and more PPL customers have started to shop for third party electric suppliers to save money against the high PPL default electric rates.  People are discovering that there are significant savings available for taking the time to compare electric providers.

Businesses especially have benefited from the competitive electricity market.  Large businesses who spend over $10,000 a month are saving as much as 30 percent in some areas.  Meanwhile, PPL residential customers are saving a more modest 10-18 percent through various electric companies.

While PPL default electric rates are expected to decrease in 2011, current electric rates are well below the 2010 default prices and less than what the 2011 rates are expected to be.

The Pennsylvania competitive electric market has provided a number of product options for electricity consumers, including low variable rates and peace of mind fixed rates.

Right now, the lowest residential electricity offer is $0.08884 per kilowatt hour, a 15% savings off of the default rate.  That rate is being offered by Champion Energy, who recently won an award for Customer Satisfaction in Texas.  Champion offers consolidated billing in the PPL area, which means that their customers still receive their bill from PPL electric.  The only difference is that instead of paying the $0.1044 PPL rate for Generation and Transmission, they will pay $0.0884.  The delivery charges remain the same.

In Central Pennsylvania, electricity customers of PPL are finding that they can lower their monthly electric bill by comparing electricity companies and finding a competitive electric rate.

The price to compare rate for PPL residential customers, also known as the default supply rate, is $0.10448 per kilowatt hour.  The lowest fixed electric rate that we have been able to find for customers in the PPL area is $0.0889 per kilowatt hour, an easy way to save 15% off of the electricity bill.  To lock in these savings go to Champion Energy.  The plan locks in the low rate for 12 months.

A month-to-month variable rate with 11% savings versus the PPL price to compare rate is available with Verde Energy, also known as Low Cost Power.  They also have a $50 cash back bonus program when you sign up with them.

The price to compare rate is expected to be lower in 2011, but it is unlikely it will go well below 10 cents, if at all.  Competitive electric rate offers allow residential customers to lock in low fixed rates for up to two years, allowing protection from rates increasing drastically.

The electricity wholesale market is highly correlated with the natural gas market.  In recent years the natural gas market has been extremely volatile.  In Texas, where electricity has been deregulated since 2002, customers saw all time high electric rate prices in the summer of 2008 followed by some of the lowest rates just one year later in the summer of 2009.

Philadelphia electricity users are customers of PECO energy, who provides electric supply service as well as electric delivery service for businesses and households in the city.  While PECO energy will remain the electric delivery company for these electric users, many customers will change their electric supply company in 2011 when PECO’s capped rates expire.

Starting January 1, 2011, commercial and industrial energy users in Philadelphia who do not choose an alternative energy company to supply their electricity needs will be on the PECO default electric rates.  Most businesses in Philadelphia will find in advantageous to shop and compare Pennsylvania electricity companies.

Large Commercial and Industrial electricity users in the PECO territory (whose KW demand is greater than 500KW) will pay a default price to compare rate of $0.0897 per kilowatt hour, if they elected to go with the fixed default electric rate.  If they did not elect for the fixed default rate, they will be forced to ride the volatile hourly ahead market rates.  Large electricity users in Philadelphia have bee offered fixed electric rates of $0.072 in recent weeks, a price 19.8 percent less than the PECO price to compare default rate.

Small and medium commercial customers in PECO will not know their exact price to compare rate until later in the year.  It is estimated it will be between $0.09 and $0.095 per KWh in 2011.  The number of electricity companies offering competitive rates to these customers will increase as 2011 approaches.  Savings are expected to be between 8-15% off of the price to compare default rates.

Update:  We have received numerous reports from our partners at Electric Rate that businesses are seeing significant savings with competitive peco commercial rates for contracts starting in 2011.

If you are looking for competitive electric rates for your home, we would recommend the below:

The purpose of this article is to briefly explain the different type of electric providers in the Pennsylvania PPL electric market.

With the competitive electric market in the PPL utility territory maturing, business and residential customers are starting to become more familiar with some of the 30+ alternative suppliers’ brand names.

With many consumers the idea of electricity choice is still a foreign concept, and difference between providers is minute.  In reality the difference between some electric providers can be vast.  To start, though all electric providers are selling the same end product, electricity, how and who they sell it to will determine if they can be a right fit for you.

I put the providers into three categories:  Level 1 (Bait and Switch), Level 2 (Fixed Rate), Level 3 (Large Business Complex).

Level 1 providers are providers like Viridian and Glacial Energy.  They present an easy and friendly way to switch showing an introductory rate that is less than current default rates.  There rate is a floating rate that can changed at anytime.  Their market is usually small businesses who spend less than $1,000 a month.  They attract a customer who is unwilling to sign a more complex contract that would allow them to lock into a low fixed rate.

Level 2 providers offer customers a true fixed rate that will not fluctuate during the term of the contract.  Their contracts are more complex than that of the Level 1 provider because they are essentially buying the power for the specific customer on the wholesale market in advance.  This is how they are able to offer a fixed rate.  Providers like this include Liberty Power, Con Ed Solutions, and Direct Energy.  Their target markets are businesses that have good credit ratings.

Level 3 providers are usually only willing to service large business customers.  They tailor their rate products and contracts for those customers.  Their contracts are usually the most complex and often the customer will benefit by having a licensed broker represent them in negotiating the contract with the provider on their behalf.  The complexity of the contract is however justified as the provider is making a large investment, by agreeing to buy a large block of energy, for the customer and in doing so can save the customer a lot of money on their energy expenses.  Though not always limited to these type of transactions, some of the providers that are more likely to fall into this class are Suez Energy, UGI Energy Services, and Constellation New Energy.

For more information on specific providers, feel free to leave a comment or send and email.

PECO is trying to prepare their customers for choice in who charges them their electric rates by unleashing multiple programs.  Recently, the PA Public Utilities Commission announced that Pennsylvania utility companies will offer customers a choice of who they buy their electricity from.  In addition, price caps that expired in 2011 in the PECO area - as well as Met-Ed, Penn Electric, and West Penn – have increased default rates and given consumers an incentive to shop.

PECO is rolling out numerous programs to help customers cope with increases including the PECO Smart Home E-Audit, Smart Lighting Discounts, Smart Home Rebates, and Smart Appliance Recycling.  Alot of smart programs, but probably the smartest way consumers will be able to reduce their electricity bill is by shopping for an alternative supplier that will offer a reduced rate versus the PECO price to compare default rates.

PECO will continue to deliver power to those customers who they are currently delivering to as well as continue to send invoices out.    The decision to choose an alternative electric generation company will simply be a choice to pay less.  We will be providing contact information and rates for alternative providers as we get closer to 2011.

Update, as promised above, here are the absolute best rates and electric providers we have found in PECO:
Rates are updated Daily

Question and Answers for Electricity Choice in Pennsylvania

Why should I shop the market?

Savings are available.  If you haven’t shopped you are paying what the state calls a price-to-compare rate.  Your local utility (PPL, PECO, Met-Ed, Allegheny, ect.) does not profit off of price to compare rates.  They simply pass on these default rates that are provided by generation companies who have bid to supply energy to you and other customers who are slow to shop.

Why shouldn’t I shop the market?

Only if price to compare rates are lower than the current competitive market rates.  This isn’t the case right now.  If the goal is to pay the lowest electric rate (and why shouldn’t it be?) then you should shop and sign a contract with a licensed electricity generation company.

What is involved in the process of changing who supplies my electricity?

In order to change electric suppliers and receive a lower rate, all that needs to be done is to sign an agreement form with the provider you have chosen.  The agreement form will stipulate the rate you are paying for the term (example: $0.085 cents per KWh for 12 months)

Will someone come to my property to change the wiring?

No, nothing is physically changed.  Your local utility still delivers power to your property.  The new supplier simply informs the utility that you will no longer be paying default (price to compare) rates and instead will be paying the lower rate that you have contracted for.

Can the local utility “get back” at me for switching off of the price to compare by not responding to service calls or charging me more for delivery?

Absolutely not!  First, through deregulation the utility companies are only in the business of delivering power.  They are not able to make profits off of supply service.  There supply service is through other private companies who have won a series of auctions to be able to supply price to compare rates to customers.

Second, just to give you peace of mind, all actions by utilities including delivery rates and repair services and regulated and monitored by the PA Public Utility Service.

Feel free to post more questions that will be answered immediately.

Customers in the PPL territory who have not signed an agreement to be serviced by an alternative electric supplier are paying the highest electricity rates in the region.  Since price caps expired on January 1, 2010 a large amount of residential and surprisingly commercial customers remain on PPL default service, in some cases paying 20% more than what is available on the competitive market.

It is important for customers to understand the benefits of shopping for supply or generation electric service.  There seems to still be a misunderstanding among the masses about the new role of PPL; they are soley in the business of delivering power and not supplying power. Shopping for low Pennsylvania electric rates will lower consumer’s monthly electric bill.

Many customers reluctant to switch providers say they wish to remain “loyal” to PPL.  It is important that these customers educate themselves so that they can understand that PPL does not see any profit from supplying them with default service.  That money goes to 11 different suppliers in 8 states who won auctions to provide power to default customers who are slow to shop. 

So what does all this mean.  If you don’t shop you are paying the highest rates in the area to companies who have won an auction to supply service to you at default rates ($0.10402 for most commercial, $0.10448 residential).  Those 11 companies who won contracts to supply power will see profits from the default service.  If you shop the market you can save between 10-20% on your monthly electric rates and the company who you choose to supply you with power will see profits.  Either way, PPL will not see profits from the supply portion (generation plus transmission) of your bill.

For a list of competitive suppliers and their current rates you can either email us with subject line (Send Rates) or join our Power Club on the right.

Falling natural gas prices have resulted in lower competitive electric rates for PPL customers looking to shop.  Rates as low as $0.086 per kilowatt hour can be locked in for small businesses.  This would result in a 16.5% savings versus the small business default rate of $0.10402 per kilowatt hour.

The extremely volatile natural gas market is at its lowest point since 2005.  Ideally businesses should take advantage of this time and sign 24 to 36 month fixed rate contracts with a competitive electric supplier.  Generally people like to get their feet wet before they jump in.  As a result most Pennsylvania electric customers who have switched suppliers have signed short term contracts (12 months or less).  However, with prices as low as they are, it makes sense to lock in for a long term fixed rate.  The chances of these rates getting higher far exceeds them getting lower over the next 24 months.