Competition, along with market forces, are driving down the cost of electricity in Pennsylvania.

In early September, Pennsylvania Power and Light (PPL) announced a 9 to 12 percent decrease in the generation portion of electric bills for residential consumers. The company expects a similar decrease for their commercial consumers. Alternative electricity suppliers in the area have indicated that they will likely follow suit and decrease their rates in an attempt to woo more customers from PPL.

As Brian Weatherford, Constellation Energy Regional Vice President explains, “This is one of the benefits of a deregulated market: As markets are down, those cost savings get passed along to the consumers.?

Currently, more than 30 companies are competing for PPL?s commercial customers, capturing over 40 percent of the market. And even more industrial customers have switched, nearly 80 percent. PPL business customers saw a rate increase of at least 30 percent last January when rate caps expired.

Meanwhile, in the Allegheny Power, Metropolitan Edison, Philadelphia Electric Company (PECO), and Penelec markets, rate caps are set to expire at the end of 2010. Over 65 alternative providers have already set up shop in these areas to provide cheaper electricity to commercial and industrial clients.

Universities and local governments, such as, Warren Twp., Allegheny College, and Ursinus College, have already entered into long-term agreements with alternative energy suppliers.  By acting early, these organizations will be able to take advantage of historically low electricity rates for years to come.

But it?s not all sunshine and rainbows in the Pennsylvania electricity market. PPL is asking for a substantial 5% distribution charge increase. The distribution charge is the cost of delivering electricity; this part of your electricity bill is regulated and cannot be decreased by shopping around. The same is true in Philadelphia where PECO is requesting about a 10% distribution increase.

The Pennsylvania Public Utility Commission (PUC) will decide if recent improvements of power lines and the delivery infrastructure warrant such an increase in fees. In most cases, the Commission grants a portion of the requested increase.

While everyone will be paying higher distribution charges, those who shop for an alternative supplier will still be spending less on the generation part of their bill, meaning they are still paying less overall. For example, if you shopped for a residential alternative supplier in PPL?s territory, you are probably already paying less than next year?s estimated 9.4 cents per kilowatt hour rate- a decrease of one cent per kilowatt from 2010. Current competitive rates in the PPL area range from 8.9 cents to 9.7 cents per kilowatt hour.

Yes, the market is working its magic in the Commonwealth- ensuring low electricity rates are always passed on to Pennsylvania consumers.