Updated: Dec 15, 2021
In Pennsylvania all consumers have the ability to choose their electric energy supplier. You might be able to save money or perhaps choose a supplier that sources more “green” energy. If you don’t choose an energy supplier, you will default to the energy supplier in your geographic area. Here are some tips to help you be a smart shopper.
Switching Suppliers Won’t Improve Unreliable Service
When you choose a company, you are essentially choosing the company that generates your electricity. Since energy suppliers have no way to get electricity into your home, your public utility company will still be your provider because they own all the poles and wires. They will also continue to handle customer service issues and infrastructure upgrades.
Understand How Electricity Billing Works
Your bill is made up of generation charges, transmission charges, distribution charges, customer charges and transition charges. Of these charges, generation charges makes up the majority of your electric bill. This is the charge being billed by the suppliers you choose and the commodity you are shopping for. Each local electric utility has a “price to compare.” The price to compare is the price charged by your local utility for the portion of your service that is open to competition. The price to compare is given in cents per kilowatt hour (kWh). There are basically three charges to your bill.
Distribution Charges – Charge for use of local wires, transformers, substations and other equipment used to deliver electricity to households over high voltage transmission lines
Transmission Charges – Charge for moving high voltage electricity from the generation plant to the distribution line of an electric distribution company.
Generation Charge – Charge for the production of electricity.
In addition to these charges, your utility company also bills for the following charges which are unrelated to delivery of energy:
State Taxes – Charge or tax by the State of Pennsylvania
Customer Charges – A monthly charge to cover cost of billing, meter reading and maintenance.
The Pennsylvania Utility Commission allows you to insert your zip code and obtain a list of suppliers and their competitive prices in your area. The list also includes a breakdown of which companies provide green options.
3 Rate Structures You Can Choose From
Now, here’s where things can get tricky. The following are pricing options that affect kWh costs. They’re considered standard in the industry.
Fixed: This is a locked-in unit price for kWh throughout the term of a contract. If energy prices increase during your contract, your unit price won’t be affected. But if prices drop below the unit price, you’ll end up overpaying.
Floating: Also known as a variable rate, this allows a homeowner’s unit cost to rise or fall based on the wholesale value of electricity. Although this may sound like a great deal when prices are low, if the market becomes unpredictable or if prices sky rocket, it can be difficult to manage your home’s energy costs.
Hybrid: This is when a percentage of energy use is billed at the fixed rate and the remainder is billed at the floating rate. In this case balance is everything. You could end up with a whopping energy bill if the floating rate goes up and it’s applied to a large percentage of your bill.
7 Questions to Ask Electricity Suppliers
Does the price per kWh include sales tax? The prices on the PUC site include the gross sales tax, but if you call companies asking for their price to compare make sure to inquire as to whether or not the quoted price includes the gross sales tax.
Is price per kWh a fixed or variable price?
Is there a monthly service charge or any other fees?
Is there a contract and if so, will the price change once the contract is up?
Am I getting a special one-time deal? If so, how long does it last and what happens to the price when it’s over? A number of suppliers offer an introductory rate whose price to compare (PTC) is generally lower than the price at the beginning of the next term.
Are there any other discounts and promotions I should know about like referral programs?
Is there a fee if I decide to cancel the contract before it expires?
Final Words of Wisdom
Avoid automatic renewal. You don’t want your contract to renew automatically without your permission. Prior to your contract expiring, you should receive two contract renewal notices from your current supplier. The initial renewal notice should arrive 45-60 days prior to your contract’s expiration date.
Additionally, the supplier should provide you with an options notice, which includes certain information including the specific changes to the terms of service being proposed; information on new prices; an explanation of your options and how to exercise those options; the date by which you must exercise one of the options; and the electric distribution company’s price to compare. The options notice should be sent to you no later than 30 days prior to the contract’s expiration date. Read these notices. If you choose to take no action with your renewal and options notices, your rate may change. For example, a fixed rate may change to a monthly variable rate. If you have a variable rate, once the term expires, you may be moved to a different variable rate that could be higher.
Ask for Help if You Need it.
There are resources available to help you interpret utility supplier contracts and their jargon before you sign to something you may be unfamiliar with. The knowledgeable lawyers at Fiffik Law Group are ready to assist you in your contract needs. Contact them today with any questions you have or to go over your own contracts or agreements.
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