“. . I am confident that an appropriately designed end-state and implementation effort will result in the Commonwealth becoming the most competitive marketplace in North America,” said Ron Cerniglia, Director of National Advocacy, Government and Regulatory Affairs for Direct Energy. This prediction was made at the final Pennsylvania Utility Commission (PUC) hearing on the retail electricity market in March. The state PUC spent a year investigating the best way to combat apathy and misunderstandings surrounding electric competition. The final recommendations will be released at the end of the April.
The growth of Pennsylvania?s young electricity market has followed the precedent set by other states, with adoption of alternative suppliers beginning with business and residential customers in urban areas before spreading to rural and suburban areas. But regulators are not content with the pace of adoption, even though experts expect the number of residents switching to continue to grow.
As of early April, 29.3 percent of the state’s residential customers, or about 1.6 million, had switched electricity suppliers, according to the PA PUC.
To boost shopping numbers, the PUC is set to launch a $5 million education campaign- the funding mechanism is still up for debate. Different suppliers have proposed different methods of offsetting the costs, such as, assessments or voluntary contributions.
Richard Webster, Vice President of Regulatory Policy and Strategy for PECO, proposed funding programs through generation suppliers with a Purchase of Receivables (POR) discount. This method is currently used to collect the costs of implementing POR programs and recovery costs of customer referral programs. A POR approach would be readily available and scalable.
In contrast, Direct Energy presented two alternative options. They argue downward pressure on prices, energy efficiency, and innovations are societal benefits justifying the use of a one time non-bypassable charge, or systems benefit charge, equal to about one dollar per customer per year. This approach could easily be incorporated in the pending default service proceedings involving each of Pennsylvania?s major utilities.
A second approach is a ?Fair Share? fee where the program costs would be allocated between utilities and competitive suppliers based on the current level of statewide migration. For example, competitive suppliers would be responsible for approximately 29 percent of the costs, where each of the 30 residential suppliers and 50 nonresidential suppliers would be asked to contribute the same fee.
Direct Energy is opposed to using POR because it violates the principle of cost recovery, where charges follow cost causation. Utilizing POR, they argued, would result in the unintended consequence of exempting those suppliers who do their own billing and could discourage those utilizing POR.
Regardless of what payment method is chosen, consumers in Pennsylvania can expect to hear a lot more about the benefits of electric choice in the next year. “We’ve got a tremendous workload ahead of us,” PUC Chairman Rob Powelson said. “I don’t know of any jurisdiction that is taking the leap of faith we are.”
