Author: Jennifer Walters

It’s January 2011 and, finally, all Pennsylvanians have the right to choose their own electricity suppliers, ending a 15 year process.

As a member of the Pennsylvania Public Utility Commission and a “choice advocate” at the very beginning, I can look back today and say that we did well, knowing what we did at the time and understanding that the electric generating and distribution industry had hundreds of billions of dollars invested in a hard-wired system that needed to be changed gradually over time.

Now that the transition is complete, it’s time to look at ways we can tweak and improve how consumers can and do exercise choice to bring the benefits and full and robust competition to the marketplace.

Looking at the record, over time, we can see that many people are shopping for electric power. In the industrial and commercial sector, almost everyone shops for power. Over the past decade, most have switched suppliers, many more than once. Competition is real and there’s an active market in competitive pricing and a new cottage industry in consultants who make a good living from taking a small percentage of the money they are able to save their clients by shopping aggressively and scientifically as well as by recommending ways to conserve and reduce energy consumption.

On the residential side, we’ve made a good start. But it’s only a start. We can do better.

Residential choice has been a disappointment to me in some ways because we – the de-regulators – underestimated the bonds of decades of living under a public utility monopoly. Like the “Stockholm Syndrome,” consumers develop a bond with the people who have been supplying their electricity that’s difficult to break even if they know they can save $5 or $10 or even $20 a month by shopping for a better deal. And, for many, the choices become confusing.

That’s why, like many who have worked hard for utility choice for years, have come to support the idea of changing the so-called “default provider” approach which assigns an electricity consumer to a “default supplier” chosen by the PUC – usually the electric generating company affiliated with the power distribution company – to consumers who don’t designate a choice.

The truth is that customers are a tangible asset for power generators and distribution companies. In the merger now proposed between First Energy and Allegheny Energy in Pennsylvania, the deal is valued at upwards of $8.7 billion in no small part because the combined companies will have some 2 million customers in Pennsylvania.

Customers are so valuable, in fact, that one company has proposed that the PUC auction off blocks of customers to the highest bidder. The positive consumer twist is that the money raised from the auction would go not to the PUC but would be divided up pro rata among the utility customers. Economists estimate that auctioning off the default provider pool resulting from the First Energy/Allegheny combine would result in one-time, cash rebates of $150 to $500 per household. And that would be in addition to any money saved from the increased competition resulting ending the virtual monopoly owned by generating companies owned or affiliated with power distribution companies.

The auction could even have protections built in to assure that small, alternative power providers would be able to bid competitively for smaller blocks of customers. In other words, the auction concept would be good for competition and good for consumers and champions of the environment.

Thus, it’s a concept we should all recommend highly to policy makers in Harrisburg as we enter the next chapter of energy choice in Pennsylvania.

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Nora Mead Brownell, an Erie native, is a former member of the Pennsylvania Public Utility Commission and the Federal Energy Regulatory Commission and is a consultant on public utility issues.

A few days ago, Energy Consumers First went on the road to the home improvement show at the York Expo Center in the heart of Met-Ed (FirstEnergy) country. Over a couple of days, I had the honor to talk to probably hundreds of citizens about energy choice.

And, I got an earful. York Countians told me they are disappointed by the lack of choice they’ve seen to date in the FirstEnergy territory which was opened up to the competition on January 1. Thus far, they have a choice of only two competitive electric suppliers – FirstEnergy Solutions (the power supply affiliate of FirstEnergy, their distribution utility) and one other. Many savvy consumers know that just next door in PPL territory, there are more than a half dozen companies competing for the electric supply business.

Consumers wonder why this is.

To be fair, competition is young in FirstEnergy territory. But the situation is also complicated by the proposed merger of FirstEnergy with Allegheny Power, which would make the combined company the largest of its kind in the Keystone State, serving all or part of 50 of 67 counties and over 2 million customers.

And, just maybe, some competitive suppliers are wary of going up against FirstEnergy, because they see how weak the competitive market has been in FirstEnergy’s home state of Ohio. There, competitive energy suppliers complain that FirstEnergy makes it difficult for customers to switch power suppliers.

Fortunately for consumers, Pennsylvania is not Ohio. The PA Public Utility Commission, right now, is in a position to ensure more competition than we’ve seen in Ohio as part of its authority to approve or disapprove the proposed merger with Allegheny Power.

One way to help ensure a level playing field for all competitive energy suppliers is to do something in the proposed FirstEnergy/Allegheny Power territory about the way the so-called “default provider pool” is handled. In most cases, the default provider is the energy-generating affiliate of the local electric distribution company.

The “default provider pool” is made up of customers who don’t choose a power supply source. It’s sort of like saying to the pharmacist, “I’ll take the generic equivalent of the brand name drug,” only you don’t get the highly discounted price. Statewide, about three out of four customers don’t choose a competitive provider.

The thing is that for all of us consumers, that’s “leaving money on the table.” As consumers, we are valuable assets to power suppliers. Some power companies are more than willing to participate in an auction of “default pool” customers.

In one proposal now under consideration at the PUC, power suppliers would bid on blocks of customers – in multiples of say, 25,000 or 50,000 at a time. The money paid by the high bidders would then be divided, pro rata, among all customers in the service area. Estimates are that an auction of customers in the FirstEnergy/Allegheny territory could fetch enough money to pay upfront rebates of $150 to $500 per household.

Just as important, over the long haul, it would bring “robust competition” to FirstEnergy country and make my new York County friends very happy.

The Pennsylvania Public Utility Commission is in an unusual position right now. It has the leverage to use its power to approve or disapprove the proposed merger of First Energy and Allegheny Energy to shape major new policy to take energy competition to a new phase in the Commonwealth.

The long first phase has seen most commercial and industrial consumers undertake an active search for a competitive power supplier. A significant number have continued to shop, changing suppliers two or three times, shopping for the best deal. On the residential side, though, about four in five households make no choice at all – they become, through inaction, members of the default provider pool.

Now comes the PUC opportunity. As a condition of approving the merger of the two distribution utilities, the PUC could require that we change the way the default provider pool is handled. One excellent concept involves conducting an auction of blocks of residential customers. And this is where I think it could get really exciting because a competitive auction could open the door for Pennsylvania households to tap into the benefits of the Marcellus Shale natural gas bonanza now unfolding.

An integrated production company – someone who drills the wells and then uses it commercially – could use its Marcellus Shale output to fire turbines to generate clean electricity. Because the electricity could be generated close to the well-heads, the need for long-distance transport via intrastate and interstate pipelines could be avoided. Because the company that owns the wells could generate the electricity – and sell it to the block of customers they purchased – would mean lower kilowatt-hour costs.

The beauty of this concept is that residential consumers would still be guaranteed choice. If they wanted a different supplier from the auction winner, they could still switch. But, because we now know from a decade of experience that three out of four – if not four out of five – will not care to switch, the auction winner would still have a good, solid base of customers so long as they kept their prices low.

One power supplier has taken this concept a step further. They believe that the bidding will be so intense that the funds collected from the auction could result in a pro rata rebate to all residential electric customers in the First Energy/Allegheny territory ranging from $150 to $500 per household.

I think the rebate idea is great. But I think it would be just as important to create an incentive for someone to use gas from the Marcellus Shale in Pennsylvania to directly benefit Pennsylvanians. Especially if they could generate the electricity at a lower cost than typical gas-fired turbines using gas purchased on the open market.

It could be a win-win for all Pennsylvanians.

FOR IMMEDIATE RELEASE: February 24, 2011

HARRISBURG (Feb. 24) – Energy Consumers First (ECF), a new coalition pushing for a stronger consumer bill of rights and more energy competition, expressed disappointment that the Pennsylvania Public Utility Commission (PUC) missed an opportunity today to increase consumer choices as part of its approval of a merger between FirstEnergy and Allegheny Power.

As part of its ruling, the PUC did announce a study of the “state of competition in Pennsylvania,” an action ECF said it welcomed even though its recommendations would come too late to help customers in the FirstEnergy/Allegheny Power territory in the short run.

“The merger of FirstEnergy and Allegheny Power creates the state’s largest electric service area, involving some 50 of the state’s 67 counties,” said Barbara Hafer, ECF spokesperson. “But the reality is that unless the PUC moves to change the climate for competition, customers in that territory currently have only two choices – go with the power provided by the incumbent utility’s subsidiary, First Energy Solutions, or one other option. That’s not what anyone would call ‘robust competition.’”

Hafer, the state’s former Auditor General and Treasurer, said she believed that the PUC was trying to respond to consumer concerns voiced through Energy Consumers First by commissioning the study of competition “and we’re committed to working to make the project a substantive success.”

She said, “The PUC has listened and heard citizens including those who have spoken through Energy Consumers First. Pennsylvanians wanting more electricity choices was a consistent message I heard while attending community events and speaking on talk shows across the state.”

While energy choice has been rolled out across the state over the past decade, it’s been more of a success in the commercial and industrial sector than among residential customers, Hafer noted. “The business sector success proves that energy choice is the right way to go but the fact that only one in five residential customers make a change says that the PUC needs to do more to ensure a level playing field among providers. And it appears that the ‘default provider’ process is the place to make improvements in the interest of consumers.”

Hafer said she was particularly pleased that the PUC review promises fair consideration of a plan to auction off blocks of what are called “default service customers” — those who do not choose a competitive provider — with the proceeds of the auction being shared among customers in the form of a rebate.

“Right now, as long as one company controls 80 percent of the market, they’re going to exercise a virtual monopoly affecting both the price of electricity and innovation. Now is the time to level the playing field and increase competition.”

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Barbara Hafer; Mobile 717-512-8330
Honorary Chairwoman
or
Tony May; Office 717-238-2970

How many times have you heard a neighbor or friend complain about utility and fuel bills? Most people believe we have no control over these escalating prices and are powerless to prevent them.

Some ways to take control are obvious – using the shortest driving distance between two points, eliminating unnecessary car trips, keeping your speed under 65 and your engine and tires in good working order. At home, implementing a host of little energy conservation measures that, in aggregate, add up to big savings. Few, though, are as simple as taking advantage of electric choice, which is fast becoming a reality for most Western Pennsylvanians.

As electric rates caps have come off in other parts of the state, many consumers have exercised their right to switch electricity suppliers. Now, nearly a third of the electricity provided to Pennsylvania homeowners is coming from a competitive supplier. This is one of the highest rates in the nation among those states who allow electricity competition and probably the biggest reason for this success is that you can select an energy supplier who offers lower rates and products which better meet your needs.

This freedom of choice is in jeopardy here in Western Pennsylvania as the caps expire in the Pennelec, Met-Ed, Penn Power and Allegheny Energy service areas in January. Why? Because the pending merger of First Energy and Allegheny Power, coupled with ground rules favoring electric distribution companies that have inter-related energy generation arms, will stack the deck against the full and robust competition that already exists in other parts of Pennsylvania.

Allegheny will become part of First Energy, giving the energy behemoth a stranglehold over most of the state when measured in terms of square miles of territory. Not only does First Energy want to be the distribution company for more than 2 million Pennsylvania households, they want to be the default energy supplier, making it extremely difficult for other energy suppliers to compete.

Most utility customers don’t know where their electricity is generated or how it is produced. Unless they speak up; unless they become savvy energy shoppers, First Energy would become both their electricity supplier and power distributor, and they will be billed at the higher default rate.

Why should smart consumers care who provides the “default service” to those who don’t shop for a better deal? Because putting the default share of the market up for bid can and would drive down electricity prices for everyone, just like any competitive bidding process.

This is as blatant a power grab as I have witnessed in four decades of public service and I urge citizens living in the Pennelec, Allegheny Energy, Penn Power and Met-Ed territories to speak up for full and open competition.

Electric choice raises consumer awareness and empowers us to be more involved in our energy usage and what we pay. This is a crucial first step in solving our nation’s energy problems, as it helps make us ‘think’ about the costs of turning on that light switch or letting the thermostat stay on high. It is said that knowledge is the first step on the road to freedom, and I believe full electric choice is a first step on our way to energy independence.

Barbara Hafer named Honorary Chairwoman of Energy Consumers First coalition

FOR IMMEDIATE RELEASE: October 27, 2010

Pittsburgh, PA – Electricity customers in Pennsylvania deserve fair rates and full choice in selecting an electric power provider, according to the newly-established Energy Consumers First coalition, which today outlined a detailed Energy Consumers Bill of Rights that it seeks to have adopted by state regulators.

The new coalition seeks to give Pennsylvania’s energy consumers a stronger voice in utility issues, including how the upcoming expiration of rate caps is handled in Western Pennsylvania for customers of Allegheny Power, Met-Ed and Penelec.

The new Energy Consumers First coalition has already been endorsed by former state Treasurer and Auditor General Barbara Hafer, who has been named Honorary Chairwoman of the effort. The coalition is a citizen-driven initiative whose goals are to ensure that energy consumers’ rights are defended and that they are provided with accurate, timely and unbiased information about choosing an electric supplier once rate caps are terminated on January 1, 2011. The coalition believes that consumers should experience the full benefits of electricity competition as was envisioned when the Act was passed.

“The Energy Consumers First coalition is primarily a consumer protection effort that focuses upon public education and awareness,” said Barbara Hafer during a formal launch press conference held in downtown Pittsburgh today. “Our goals are to ensure that energy consumers are paying a fair price for the power we use, and that we have full electric choice once the rate caps do expire.”

Hafer said the genesis of the new coalition was the pending merger of energy giant First Energy with Allegheny Power, and First Energy’s efforts to have it designated as the “dominant supplier” for electric customers in the Allegheny Power and other Western Pennsylvania service areas. The merger request is currently being considered by the state Public Utility Commission, which is expected to conclusively rule on the matter early next year.

One of the alternatives to the First Energy “dominant supplier” plan is to have all of the electric customers in the affected area be entered into a pool of customers that would be bid upon in a consumer-friendly public auction, with auction proceeds then returned to the individual residents and businesses in amounts ranging from $150 to $500, a significant benefit in today’s economy. This proposal will foster true competition among electricity suppliers for the affected customer accounts. The rebate idea is also being considered by the PUC as part of the merger request in spite of First Energy’s adamant opposition to it.

Hafer noted that another key aspect of the coalition’s mission is ensuring that the rates consumers pay are true and accurate, and reflects what the actual costs are to the utility. Many electric utilities are locking in their customers’ energy supply at higher than market rates for extended periods of time, even though the costs of buying that power have decreased over time. Without competitive options, customers could be locked-in to higher rates, rather than being allowed to receive the rebate and potentially lower rates.

“This is an unacceptable situation and our regulators and legislators in Harrisburg should be taking steps to prevent this unfair and inequitable practice,” noted Hafer. “Pennsylvania residents continue to struggle in this economic downturn, and certainly every extra dollar that they can get or avoid having to pay will be well-used and appreciated.”

The Energy Consumers First coalition is urging consumers from across the state to sign its online petition urging the adoption of the Energy Consumers Bill of Rights, as well as contact the PA Office of the Consumer Advocate to express support for it. Letters, emails, and calls to local utilities and legislators are also being solicited. More information on the Energy Consumers First coalition can be obtained from the organization’s website at www.energyconsumersfirst.com, or by calling 1-866-885-3438.

Contact:
Randy King, 1.866.885.3438
rking@energyconsumersfirst.com

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Attachment: The Energy Consumers Bill of Rights