PPL’s problem proves it, electricity shopping isn’t in consumers’ best interest | Ray E. Landis
Pennsylvania’s electric deregulation law has again let down consumers. Here’s how
Transmission lines in Louisa County, Va. (Photo by Ned Oliver/ Virginia Mercury)
Many PPL customers in Pennsylvania have had a rough start to 2023. Their first electric bill of the new year was shockingly high, and when they attempted to contact the utility for an explanation, the volume of calls overwhelmed PPL’s call center, resulting in agonizing wait times.
The situation may appear to be an internal problem for those living in PPL’s service area compounded by high energy prices resulting from the war in Ukraine. But a closer look reveals how Pennsylvania’s electric deregulation law has again let down consumers.
The billing problem started with PPL’s computers estimating bills for many customers at usage far above the customers’ actual consumption of electricity. The computers’ cousins, PPL’s automated customer service lines, compounded the situation by frustrating consumers who called to inquire about their bills.
The utility sent an apology letter to customers in which they promised to hire more agents, but the Pennsylvania Public Utility Commission has opened a formal investigation into the true causes of the situation, which could result in fines for PPL.
PPL’s letter was not only about the estimated billing problem, however. The utility also attempted to explain to its customers why their electric bills have increased so dramatically whether they were estimated or not.
This part of the communication was not a mea culpa by PPL.
In Pennsylvania’s deregulated electricity environment, PPL is an electric distribution company (EDC). PPL is one of eleven EDCs in the Commonwealth.
EDCs are responsible for the electric infrastructure in their service areas. They maintain the wires, the poles and connections to homes and businesses. Before electric deregulation, these companies also provided all the electricity to customers in their area.
Electric deregulation changed this. The eleven EDCs continued to maintain the infrastructure, but consumers and businesses were now free to contract with any company approved to be an electric supplier in the Commonwealth. These companies procure electricity and pay the EDCs for the use of the infrastructure to get electricity to their customers.
When electric deregulation was enacted in Pennsylvania, the Office of Consumer Advocate recognized some Pennsylvanians would be overwhelmed by attempting to choose an electric supplier. They convinced the General Assembly to require the 11 EDCs to serve as default service providers for customers who did not wish to shop.
PUC launches investigation into PPL Electric over ‘unusually high bills’
It turns out most consumers don’t want to be bothered. The Office of Consumer Advocate compiles statistics about how many Pennsylvanians shop for electricity. In the service areas of most EDCs, around 80% of customers are served by their default supplier. One EDC, however, has more than 35% of its potential customers shopping. That company is PPL.
Why? PPL’s current rate for electricity is 14.612 cents per kilowatt hour. The highest rate any of the other six large EDCs is charging right now is 11.25 cents – and three of the companies’ rates are below 10 cents.
PPL’s explanation to its customers for their high electric rates goes as follows:
“The default rate reflects our cost to buy power for you if you don’t shop for your electricity supply. This rate is determined through a competitive bid process approved by the Pennsylvania Public Utility Commission (PUC), and we pass along the cost of the power at no profit to us.”
PPL goes on to say “While we can’t control supply prices, here are steps you can take to help manage energy costs. Shop for the electricity supplier that’s right for you.”
It appears PPL is pushing their customers to choose an alternate supplier. But the reality is shopping for electricity is fraught with danger for consumers.
Competitive electricity suppliers are in the business to make a profit. And they have found the best way to do this is to entice new customers with low introductory rates, then increase the rates after a short period of time, counting on consumers to stay with their new company.
A number of academic studies (including this one from the Harvard Business School and this one from MIT cast doubt on the benefits of electric deregulation for consumers. In far too many cases, consumers who chose a new electric supplier end up paying more for their electricity – in some cases much more, as occurred during the infamous polar vortex which impacted Pennsylvania in 2014.
All of which makes PPL’s ineffective approach to securing affordable rates through the competitive bid process maddening for PPL customers. Energy prices have increased in 2022-23 – but PPL customers have been impacted more than other Pennsylvanians.
It is time for our elected officials to recognize shopping for electricity is not in the best interests of consumers. But until they do, PPL should focus more on buying electricity at lower prices for their customers and less on trying to get their customers to choose an alternate supplier.
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