Non-shopping Duquesne Light customers will enjoy lower rates from the utility beginning this summer, but the utility is also pushing customers to choose their own retail electricity provider.
Prior to this year, the utility has been purchasing electricity as much as three years into the future. Since market prices fluctuate, it is extremely hard to determine years into the future if customers will be receiving fair and competitive prices compared to current market prices. Since electricity prices have been steadily dropping –due to an abundance of natural gas, more renewable sources, and more competition among providers– customers have been paying, on average, more than fair market prices.
Duquesne Light will change the way it purchases and sells electricity for its non-shopping customers. Instead of long-term purchasing and price sets, the utility will adjust rates every six months and purchase electric supply annually instead of every three years. The change is expected to save non-shopping customers up to $30 a month.
According to the utility, this change has two goals:
- More affordable rates that better reflect market prices for non-shopping customers
- Creating motivation via incentives for residential customers to select from the abundance of retail electricity providers in the area
Incentives include an electric choice “opt-in” deal whereby customers will receive a 5% discount from Duquesne Light’s current rate in addition to a $50 cash bonus if they stay with an alternative supplier for at least four months. For competitors that participate, the four initial months would be followed by an 8-month fixed rate. Or, customers can receive a 7% discount to the utility’s price for an entire year.
Duquesne Light, like other utilities in Pennsylvania, cannot profit from the sale of electric supply, so there is no incentive for the utility to keep their non-shopping customers (utilities in deregulated areas can only profit form the distribution and transmission of electricity).
Duquesne Light’s lower rates will also drive competition to offer even lower rates compared to the utility, since retail electricity providers have a great incentive to offer lower rates than the utility. The utility’s new six-month electric supply purchasing plan will allow these electricity providers to have better market price signals which should result in better rates for their shopping customers. Furthermore, over 40% of Duquesne Light’s customers have chosen their own retail electricity provider for the supply side of their electric service; as more customers switch, pricing becomes more competitive which should drive pricing down.