Many Pennsylvania residents who switched electric companies over the last few months have had a rude awakening. Customers across the state reported a spike in their electric bills over the winter, some saying that their bill doubled, tripled or even quadrupled in price.
This has prompted legislators and regulators to examine the need for new laws and regulations concerning electricity.
“Many consumers have been misled by questionable marketing practices that advertise low rates but fail to emphasize the limited terms,” said state Rep. Dan Moul, a Republican who represents Franklin and Adams counties.
State lawmakers held a formal hearing on the matter on March 20 and will hold another hearing on April 10.
Most customers who saw an extreme spike in bills were on a variable rate plan. A variable rate fluctuates due to market conditions. Electric generators can continually evaluate the price per kilowatt hour.
While a variable rate may be cheaper at times than a fixed rate, it is subject to “spot pricing” and can swing drastically if conditions like the extreme cold in January occur.
According to Dave Hixson, information specialist with the Pennsylvania Public Utilities Commission, wholesale prices over the winter will typically hover around 7 cents per kWh, this winter saw prices jump up to nearly 40 cents per kWh at times.
“Although variable rates have their place in the market, they are not for everyone,” said state Rep. Rob Kauffman, a Republican who represents portions of Franklin County. “Consumers need to better understand the contracts they sign with their energy suppliers. To that end we need to make certain the marketing and disclosure information coming from electricity generation companies is more straightforward … We will work with the PUC and through legislation to make certain this situation doesn’t happen again.”
The amount of electricity used by customers also jumped 20 to 30 percent over last winter according to Todd Meyers, a spokesman for West Penn Power, who said this winter was the 13th coldest since 1895.
While most customers receive one electric bill, there are three separate components that comprise that bill — generation, transmission and distribution.
Generation (also known as supply) is the creation of electricity, while transmission and distribution are responsible for getting the electricity to homes and businesses.
In the mid-1990s, Pennsylvania began deregulating electricity, meaning customers could begin to purchase their electric generation from a third party in hopes of spurring competition and lowering rates.
To keep rates from spiking rapidly, legislators instituted rate caps which limited the cost. The rate caps expired on Jan. 1, 2011, allowing more generation companies to enter the market.
“We have to look at the suppliers and check if they were fair with their customers and not overcharging them for the electricity they were purchasing,” Hixson said.
The PUC has received more than 4,000 informal complaints about electric bills, but said so far the commission has found very few improprieties on the corporate side.
“Switching cable is one thing and switching your cell phone, but switching electric is another,” Koran Dunbar of Greencastle, who saw his electric bill jump from $150 to $917 a month, said. “It is so confusing. It is all so convoluted. I think they want you to be confused.”
Hixson said that education is key. Consumers need to fully understand what they are purchasing when they switch electric companies. He went on to say that the commission is looking to make disclosure statements to consumers clearer.
The PUC also is looking to require consumers to be able to switch power companies within three days. Currently, the process can take weeks.
“I will continue looking into this matter, and I take very seriously any allegations of impropriety,” said state Rep. Todd Rock. “I fully intend to get to the bottom of the situation to make sure that the rights of consumers are protected and that any public utility acts in good faith.”
Consumers that have concerns about an increased bill should contact their electric generator first, according to Hixson. Some companies are offering rebates or adjustments to bills, but Hixson said the companies are not required to offer them. Each electric bill should have a line item that clearly states who the electric generator is and contact information for them.
Consumers who believe the competitive supplier has violated Pennsylvania’s Unfair Trade Practices and Consumer Protection law or has engaged in price gouging, can file a complaint with the attorney general’s office at www.attorneygeneral.gov or 1-800-441-2555.