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Pennsylvania Electricity Consumers Burned by Retail Choice

April 4, 2014

In the late 1990’s, CREA joined with other consumer groups to defeat various legislative proposals designed to institute retail competition in the Colorado electricity market. Our position at the time was that retail choice would increase the electric bills of rural residential consumers as our largest loads were cherry-picked by power marketers. We understood that the only beneficiaries of the retail choice initiative would likely be large industrial customers and out-of-state companies like Enron who could manipulate the Colorado electricity market to the detriment of residential and small business customers. As it turns out, we had a pretty good crystal ball – just ask California ratepayers.

Recently, entities like the Compete Coalition have been advocating for an expansion of retail competition into those states that rejected this policy years ago. In proceedings before state utility commissions and legislatures, these advocacy groups have argued that retail competition in the electric sector will spur innovation, provide more options for consumers, and lower costs for businesses. These efforts are supported by such companies as Wal-Mart, 7-Eleven, and Staples; large commercial consumers of electricity.

Before Colorado or any other state jumps back on the retail choice bandwagon, however, they might want to consider the experience of Pennsylvania electricity consumers during this past winter. In February and March of this year, more than 9,100 Pennsylvania residents contacted the Pennsylvania public utilities commission expressing outrage about their power bills. A bitter cold snap put a strain on the electricity grid and sent electricity prices skyrocketing. Under the variable rate pricing scheme offered by certain power marketers in the retail choice-enabled state, electricity prices paid by some consumers increased by 200 – 400%; consumers who were used to seeing a monthly power bill of $150 were hit with bills topping $600.

Needless to say, the voices of Pennsylvania consumers have been heard and the Pennsylvania PUC has adopted new regulations requiring notice about the possible volatility of variable rates and requiring additional transparency of the rules under the retail choice program. The Pennsylvania legislature and Attorney General are also investigating whether the power marketers manipulated the market. In the meantime, Colorado and other states should think twice before embracing retail competition.

 

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