Pennsylvania Utilities Complete Another Round of Purchases for Default Service

May was a busy month for utilities with generation rate caps expiring.  Allegheny Power, Met Ed, Penelec and PECO all completed purchases of at least some of the power they will need to provide generation  service to customers starting in 2011.  The market based prices that they pay for these purchases will be passed on to customers as the default service price, sometimes referred to as “Price to Compare” or PTC.

While each utility has a specific plan for meeting its obligations to provide power to customers for 2011 and beyond, there are some basic similarities to all of them:

• Pricing is based on wholesale prices obtained from power marketers through a competitive process
• A series of reverse auctions or RFPs will spread the purchases over 1 to 2 years
• Customer prices will change at certain times in the future to reflect increases or decreases in wholesale prices
• Larger customers will have more exposure to market fluctuations, eventually being exposed to hourly “spot market” pricing
• Pricing will move toward a “one price fits all” structure, so that customers will no longer receive a lower unit price from increased volumes, and benefits from using power off peak will likely disappear

For the utilities mentioned above, customer prices are expected to increase starting in January of 2011.  KEYTEX Energy personnel can help customers understand the implications of these changes as they relate to their specific utility.  As the expiration of generation rate caps approaches, KEYTEX works with customers to find the most economical alternative to the utility’s default service.