Peco to Raise Electricity Supply Charge

Philadelphia - - Peco Energy Co. estimates its residential supply charge will increase by 6 percent on Oct. 1, a boost that could get the attention of customers who have hesitated to switch to discount suppliers.

The Philadelphia utility, rather than blaming the increase on rising energy costs, says it undercharged customers earlier this year and needs to adjust rates upward to recover a $10 million under-collection.

The price increase could provide an opening for alternative energy suppliers to highlight their discounts that, in some cases, now amount to 20 percent off the utility's price.

"Certainly, any time there's an increase it sends a signal to customers to look at their options," said Richard J. Hudson Jr., the Pennsylvania chairman of the Retail Energy Supply Association.

About 325,500 of Peco's 1.55 million customers have switched suppliers since the utility adopted market rates Jan 1. Most industrial and large commercial customers have switched.

Only 18 percent of residential customers have switched, despite the intense marketing efforts of three dozen suppliers. According to surveys, many customers are reluctant to switch because the savings seem insubstantial.

"Once there's an opportunity to save one-fifth of the energy bill, we think that will be a real catalyst for customers to start shopping," said Kevin Johnson, the chief executive of Alphabuyer.com, an online group-buying company whose current fixed-rate offering is 20 percent below Peco's Oct. 1 price.

In Pennsylvania's deregulated market, Peco continues to distribute power over its wires, but customers are free to shop around for a power provider.

For customers who don't switch, Peco provides power at a default rate. That default supply charge, also called the price-to-compare, accounts for about two-thirds of a customer's bill.

Peco is not permitted to make a profit on the energy supply charge. Rather, the utility makes its profit from a distribution charge that all customers pay.

The Public Utility Commission allows Peco to adjust the supply charge quarterly to reflect market changes. Peco can also adjust the price to recover under-collections, so that it doesn't lose money.

That's what happened recently. Peco got $10 million less in revenue from April through June than it was entitled to receive, and is now allowed to adjust its rate to recover the money, said Richard G. Webster Jr., Peco's director of regulatory affairs.