Energy prices have cratered, and competition is passing savings along to electric customers. Electric rates in Connecticut, Massachusetts, New York, Maryland, and Texas, to name a few, have all fallen precipitously because those states have competition in their electric industry, meaning customers can choose their energy supplier and reap the benefits of lower prices.
Even though natural gas fell to a mere $3/MMBtu last week -- the first time gas has been this low since August 2002 -- and even though wholesale energy prices from Delaware to Michigan have fallen 40% percent, there are still some states actually seeing record increases in electric rates.
One of them is Michigan, where for a decade competition kept rates in check, as the threat of losing customers to alternative energy providers kept the state's monopoly utilities from raising rates. But last year, the monopoly utilities won a major coup -- a state law that rescinded competition, and capped the amount of customers that could choose a competing supplier at 10%.
What has happened since? Predictably, rates have skyrocketed, now that utilities have an uncontested lock on 90% of electric consumers in the state. Utilities immediately filed for rate increases (even though they had just won approval for increases in 2008), and thanks to another new law, they can "self-implement" higher rates before the Public Service Commission even rules on their desired prices. The utilities are also charging customers more through line-item fees and other "add-ons" that aren't part of the volumetric rate.
Those price hikes have sent customers into the market to choose another provider. Electric choice is so popular right now that the 10% cap on choice has already been hit at one large utility, Consumers Energy. That means, as The Grand Rapids Press put it, "If you have a business and want to shop around for electricity rates lower than what Consumers Energy offers, you're out of luck." Customers will be stuck paying whatever price the utility wants.
The Grand Rapids Area Chamber of Commerce noted that because businesses and manufacturers will be stuck paying the utility's higher rates, their ability to compete will be harmed.
What does this mean for Pennsylvania customers? Like Michigan, Pennsylvania is about to end it’s "transition" period with electric choice for many parts of the state. During this transition, rates have been capped, and there have been limited amounts of switching in most areas of the state (although thousands of business customers are saving money by choosing a different provider, particularly in the Pittsburgh area).
Like Michigan, some Pennsylvania politicians want to end choice when the rate caps come off, meaning the customer could only buy from the utility. What's happening in Michigan right now shows why this would be a bad idea. Energy prices are falling in about a dozen states with electric competition, including Pennsylvania. The lack of choice in Michigan is resulting in higher electric prices despite a weak economy, lower electric demand, and plummeting prices for fuels and wholesale energy. Pennsylvanians need to stand up for competition and make sure they have the right to shop for a lower electricity rate.
As noted by former U.S. Energy Secretary Federico Peña:
“[Michigan] Customers, including many businesses as well as state and local government agencies, schools, universities and others struggling in today’s challenging economy, are now locked out of lower-priced electricity options available in the competitive marketplace ... Other states contemplating a return to the monopoly model should learn from Michigan's experience and not shut the door on competitive choice for consumers."