Pennsylvania businesses looking for price certainty in their electric rates won't find it by sticking with their local utility, and need to shop for a low, fixed rate offered by a competing electric generation supplier.

As we noted a few weeks ago, certain large customers in Pennsylvania, if they don't shop for a competitive energy supplier, will be placed on the utility's so-called "hourly" rates that fluctuate significantly during the day and expose customers to high, volatile prices during the peak hours of the afternoon.

However, while small and medium business customers in Pennsylvania will receive a flat electric rate in all hours of the day, they will still be exposed to a large degree of rate volatility if they remain with the utility.  That's because at utilities such as PECO and PPL Electric, the customer's generation rate will change every three months.

The quarterly change in generation rates will update the price of electricity charged to customers to reflect the latest round of procurements for power supplies, including supplies purchased on the volatile "spot" market to fill in any procurement shortfalls.

The quarterly fluctuations can be significant.  At PPL, which for 2010 did not adjust its rates quarterly but will do so for 2011, an originally scheduled (but ultimately deferred by state regulators) quarterly adjustment in March 2010 would have reconciled some $90 million in under-collected costs, rolling these costs into new, higher rates.  At Citizens' Electric Company of Lewisburg, PA, which adjusts its electric rates on a quarterly basis, the rate adjustment which will occur October 1, 2010 will result in a nearly 20% increase in electric rates.

Pennsylvania businesses can avoid such electric rate volatility by shopping for a low, fixed electric rate offered by a competing energy supplier.  Under the competition introduced into the Pennsylvania electric market, alternative energy suppliers offer customers the security of a fixed rate for 12 or 24 months, or even longer periods under custom-tailored contracts.

These fixed-price agreements provide Pennsylvania businesses with the necessary budget certainty in their energy costs needed to plan and run their business, and shield them from any rate shocks customers would experience by staying with PECO, PPL, or another local utility.  Not only will a customer eliminate any surprises by shopping for a fixed energy rate, customers can undercut the utility's rate by leveraging the power of competition, which puts energy providers in direct competition for your individual account to maximize your electricity savings.