Heed these early returns from the Keystone State

Engineered Systems, Oct, 1999 by Frank J. Richards

Electricity deregulation in Pennsylvania continues to evolve. Although the law has been in place for almost three years, the actual implementation has presented surprises, impediments, and opportunities to endusers.

WHERE DO YOU THINK YOU ARE, PENNSYLVANIA?

It's a cute TV ad, the new arrival in heaven asking about how things are up there, then asking whether he can choose his electric supplier in heaven ... then the incredulous response, "Where do you think you are, Pennsylvania?" Such is the flavor of the state's massive ad campaign for deregulation. Besides being catchy, the meaning rings somewhat true.

In Pennsylvania, if you've jumped through the right hoops, you may be shopping for and receiving deregulated energy this year. And unlike California, significant savings can often be realized by endusers who shop with their eyes open.

The California model does not provide an adequate shopping credit to entice endusers to switch; only 100,000 customers have switched to alternate suppliers, and this is the second year of full deregulation. Pennsylvania is still in its first year of partial deregulation, but it has already seen 450,000 of 5.2 million electric endusers switch.

In contrast to residential participation, industrial shopping has been much more active, with notable exceptions at Duquesne Light and Pennsylvania Power & Light (PP&L), each of whom have only 10% of industrial customers participating. Note, however, that even though PP&L had only 10% of its industrials participating, they must be big ones, since this 10% amounts to 32% of PP&L's total industrial load. General Public Utilities (GPU) has a very high 71% of its total industrial load shopping, although this represents only 31% of its industrial customers.

Philadelphia Electric Company (PECO) leads the way, with twice the commercial shoppers as second-place GPU, although GPU's 49% of commercial load is higher than PECO's 38%.

WHY ARE THEY SHOPPING?

So far in Pennsylvania, about 10% of electric endusers have moved to a deregulated supplier because:

* They are saving money;

* They think they are saving money; and/or

* They think "green" power is worth paying more for.

It is estimated that shoppers in Pennsylvania will save about $1 billion in 1999. However, endusers must be vigilant to be sure they are saving money. (For instance, nearly all of the 60 accounts, which are part of The Richards' Energy Group's electric users group (named REAP), have had billing errors both by the local distribution company [LDC] and its chosen electric generation supplier [EGS]).

Based on the above sample, it would appear that endusers must not only read their contract closely, but also audit the actual bills to be sure the contract is being fulfilled. However, it is worth the effort. (REAP members are currently saving about $450,000/yr [about 5%] by shopping.)

IDEAS FOR THE FUTURE

As your organization considers its options in this arena, consider these issues.

Quality of data. The better the load data which can be supplied to potential suppliers, the more likely favorable prices will be offered. Endusers of significant size (500kW or greater) should be sure to install advanced metering to allow hourly data to be obtained and stored, then transmitted through the Internet to potential suppliers for bids. Ultimately, having real-time load data available may provide the best opportunities for maximizing savings.

Timing. Although it defies logic, shopping for electricity during the summer, when day-to-day prices are high, seems to bias full-year fixed prices that suppliers will offer. So until electricity becomes a real commodity, it seems the best time to lock in prices would be early spring or late fall.

Users' groups. As suppliers become more sophisticated in accepting and collating data, banding together in diverse, strong users' groups will continue to make sense.

Portions of this article are excerpted and edited from a presentation Richards conducted at The Association of Energy Engineers (AEE) Competitive Energy Congress, held in Boston in August. Richards established The Richards' Energy Group (Landisville, PA) in 1995, after 27 years' experience with PA Power & Light and Eastman Kodak. He can be reached at 717-898-6330.

                        Residential Commercial Industrial Total
Allegheny Power         1.4         5.2        31.7       1.9
Duquesne Light          14.3        13.8       10.1       14.2
GPU                     4.05        14.82      31.34      5.46
PECO                    14.89       24.95      57.70      15.96
Penn Power              5.9         7.7        28.6       6.1
PP&L                    2.3         12.0       10.2       3.5
United Gas Illuminating 4.7         2.8        --         4.3

Percentage of Pennsylvania customers served by an alternative supplier as of July 1999. (Source: Pennsylvania Office of Consumer Advocate.)3