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Pennsylvania Bill Ending Utility Default Service a Win-Win for Consumers, Taxpayers

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The proposed legislation to end utility-provided default service in Pennsylvania (Senate Bill 1121) will not dramatically change customers’ relationships with their traditional utility companies. It will also inject half a billion dollars into Pennsylvania’s economy as it significantly closes the state’s budgetary shortfall by up to $360 million, and provides residential and business customers with $180 million in immediate savings. It’s a win-win for consumers and taxpayers.

Pennsylvania opened its retail electricity market to competition more than a decade ago and it has proven to be a remarkable success story. More than 2.1 million customers have elected to purchase their electricity from a competitive supplier, enjoying cost savings and product innovation. More than two-thirds of the electricity consumed in Pennsylvania is provided by competitive suppliers, and the cost savings derived by large manufacturers and commercial customers is helping to secure the state’s competitive advantage nationally and globally while securing jobs in the state.

SB 1121, sponsored by Sen. Bob Mensch, R-Montgomery, would effectively remove utilities from the role of providing default service. It would assign all of the state’s electricity customers to a competitive supplier using an auction process. The winning competitive supplier would supply each customer with a low, 12-month stable price, and pay each assigned customer $50 while providing the state’s coffers $100 per customer.

The price consumers pay under SB 1121 will still be determined by a competitive auction process under the continuing oversight by the Commonwealth’s Public Utility Commission. The only difference is customers will be assigned to a supplier. Customers get a check with a low-priced and stable electricity product. The state gets revenue.

Competitive providers will bring better customer service and innovative products and services, such as the option to purchase electricity from cleaner, nonpolluting resources, fixed-price service options that protect customers in a rising price environment, and time-of-use pricing. For example, some of our customers who signed up for Direct Energy’s Free Power Day product have saved 18% on their energy bill compared to what they previously paid their utility! Business customers will get these benefits too as demand response, distributed generation options (e.g., solar), and other innovative pricing and services can reduce their overall energy bills, making them more competitive in their respective areas.

And if a residential or business customer doesn't like the supplier they're assigned to, they are free to shop around and select a different competitive provider better able to meet their needs and desires.

Despite the scare tactics that SB 1121 bill opponents like to convey, there will be no shock; the transition will be fairly seamless, and customers will still have among the most robust consumer protections in the country. The only real difference will be the very clear economic and budgetary benefits this legislation will provide.

Posted: December 18, 2013

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