Market Shopping Introduction For the purpose of this thesis project, market shopping for electric generation will be investigated for the Pennsylvania region since the DRMC is located in Central PA. In 1996, legislature passed the Electricity Generation Customer Choice and Competition Act, which gave the people of Pennsylvania a choice in who generates their electricity. This Act called for retail access to competitive electricity suppliers for one-third of consumers by January 1, 1999, and for all consumers as of January 1, 2000. In the first week it was available, 1.1 million Pennsylvania consumers signed up for the Electric Choice Program. This choice is what provides competition between the different utility suppliers and drives down energy prices. When you go shopping for electricity you are, in reality, choosing a company to generate and transmit your electricity. This company is usually called an Electric Generation Supplier (EGS) and is responsible for the generation and transmission portion of your electricity. The distribution portion of your electricity is provided by your current Electric Distribution Company (EDC). It is important to note that just because you are buying separate generation from your local utility, the quality, reliability, and maintenance of your electric service will not be changed. It makes sense that most people shop for electricity generation to get a more competitive lower price, but this is not always the case. Some people decided to change their electricity because the supplier offers different services, uses renewable energy sources, offers a better budget-billing plan or is just simply in a more preferred geographical region. This market shopping study will be based purely on shopping to acquire a lower generation price. The process of providing electricity to your location has three parts: Generation: The production of electricity. You can shop for this part of your service. Transmission: The movement of electricity from where it is generated to the point of distribution. Distribution: The delivery of electricity from distribution lines to your home or business. Benjamin Ardary - 79
Procedure Overview The first step in shopping for an Electric Generation Supplier is to find the present supplier list for your region and pick one or more suppliers from that list to compare to one another and to your current generation company. Because the DRMC s current local utility is Penelec, they can only purchase generation from the following companies: Affiliated Power Purchasers, Inc. (APPI) Commodore Gas and Electric, Inc. DTE Energy Marketing, Inc. FirstEnergy Solutions Niagara Mohawk Energy Marketing, Inc. OnDemand Energy Solutions PPL EnergyPlus, LLC Select Energy, Inc. StarCorp TXU Energy Services Usource, L.L.C. American Cooperative Services Constellation New Energy, Inc. Exelon Energy Mid American Natural Resources Nicole Energy Marketing, Inc. Pepco Energy Services Richards Energy Group Sempra Energy Solutions Strategic Energy, L.L.C. UGI Energy Services, Inc. Reliant Energy Solutions East, LLC * This list was provided by Pennsylvania Public Utility Commission* The next step is to find the price to compare for each of the electric distribution companies you have selected. The price to compare is typically given in cents per kilowatt hour and usually combines the generation and transmission into one price. Therefore, if you are comparing to your local utility, you will need to combine the generation and transmission charges on your monthly bill to get your current price to compare. After finding all of your prices, you can determine if any savings can be achieved. If your current price to compare is lower than all other prices to compare, then no saving can be found. But, if it is higher than a certain generation company, savings may be had. To find your savings, first subtract the new generation company s price to compare form the present price to compare and multiply this number by your average kwh usage per month. This will give you an initial subtotal in cents. Next, divide your subtotal by 100 to calculate your savings in dollars and cents. Sometimes generation suppliers have an additional monthly fee that should be added to the previous found total to get an accurate saving price for a typical month. After all these steps have been taken, it is easily noticeable whether it is reasonable to switch from your local utility to a separate electric generation supplier. Below is a useful chart that was taken off of the Pennsylvania Public Utility Commission website which shows a step by step process of this comparative process. Benjamin Ardary - 80
Information of DRMC s Current Electric Generation Supplier Currently the DRMC purchases generation, transmission, and distribution from its local utility Penelec. Retail choice for Penelec customers began on January 1, 1999, and customers received a 3 percent rate reduction. At first, 42 % of Penelec customer load switched to a competitive electricity supplier. The majority of the switch occurred in the industrial sector, where 76.4% of the load had left its default Penelec service. This great change from local utility to outside generation companies dramatically changed by mid- 2001, when many competitive suppliers reduced their offerings or left the market all together. More recently, the percentage of companies served by EGSs decreased to about 0.3% and has been steady ever since. Benjamin Ardary - 81
From the information above, it is easy to see that in the last few years, market shopping for electricity in Pennsylvania has not been an economical option. This could change for current Penelec consumers. Starting in 2008, Penelec s current rate cap that has been upheld for the last 11 years will be lifted and they will most definitely go to the PUC (Public Utility Commission) for an energy rate increase. This energy price increase could open up possibilities for the EGS companies to lure current Penelec consumers away. But if the EGS companies can still not compete with Penelec prices, electric deregulation for the area will most likely be reevaluated or discontinued. Market Shopping Analysis Penelec s General Primary Price to Compare Generation Charge = 4.273 cents/kwh Transmission Charge = 0.92 cents/kwh Price to Compare = 5.173 cents/kwh * Information Acquired from DRMC s Electric Bills* Competitors Price to Compare Before starting to go through the whole list of generation companies listed above, I decided to first check the PJM (Pennsylvania, New Jersey & Maryland) market on what they are currently selling their generation for. I did this for several reasons. First of all, the PJM Coordinates the movement of electricity through all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. Therefore all of the EGS companies listed above have to buy their generation from the base price that the PJM is selling for. This means that the EGS companies will always have a higher price from the PJM market because of the additional charges that they apply. Below is a graph of the PJM forward generation prices from the last year Benjamin Ardary - 82
As you can see from the graph above, the current price that the PJM is selling electricity to the EGSs is around $58/MWh (5.8 cents/kwh). Therefore any of the EGS companies will have a price to compare over 5.8 cents/kwh, which is well over the local utilities price to compare of 5.173 cents/kwh. Conclusion At present time, market shopping for electricity is not economically feasible. Because of the current rate caps on local utilities, wholesale electric prices are too low for the EGS companies to compete. Also, from looking at the graph above, it seems that the PJM will not be lowering its prices any time soon, especially with the current increase in petroleum prices. Hopefully by the end of the decade, all rate caps on local utilities will be lifted and a much more competitive market will arise. But until then, market shopping for electricity is a dead end for building owners who are trying to save money by receiving a lower electricity rate. Benjamin Ardary - 83