Find The Savings: Deregulated Electrical Rates

Retirement, Income, Tax & Estate Planning.

Find The Savings:
Deregulated Electrical Rates

September 29, 2017 Newsletter 0

It’s been 20 years since Pennsylvania deregulated electrical utilities. Since then, you’ve likely been bombarded with companies offering to lower your power bill, either from commercials, online ads, or strange men with clipboards showing up at your doorstep. Is the switch worth it? I dug in to see.

Depending on who you ask, I either love a good deal or I’m just flat-out cheap. But these kinds of things (pricing structures with lots of options and a lot of moving pieces) tickle my brain just the right way.

Is it possible to save some money by ditching PECO? Read on:

Decipher The Bill
First things first, know that there are routinely five charges on your PECO bill, two of which are fairly standard (customer charge and tax) and three of which have to do with how much power you use. Usage is measured in Kilowatt Hours, or kWh, and we are billed three times on the amount of kWh we use. Of course, being a utility company, no cost is a round number… we’re dealing with halves, tenths, and hundredths of cents…

Looking at my last bill, where my family and I used 661kWh for the month and I rounded the extended decimal places for simplicity’s sake, our charges were somewhere in the realm of:

$08.50  Customer Charge

$43.63  Generation Charge      661kWh X $.066
$42.30  Distribution Charge     661kWh X $.064
$04.63  Transmission Charge   661kWh X $.007

$07.75  Tax

Know What Can Change
If you’ve used PECO for any amount of time, you know that the rates fluctuate. Distribution and Transmission Charges can change yearly, as agreements with the Pennsylvania Public Utility Commission (PUC) are renegotiated. Generation Charges can change with each bill. Generation Charges are the cost to actually produce the electricity and they can be impacted by rises and drops in gas and oil costs.

When you use a third-party energy company, your Distribution and Transmission Charges will stay the same as they would with PECO. But the Generation Charge can change with different providers. And when comparing rates, the third-party guys combine the Generation Charge and Transmission charge into one number. So, for the purposes of this article, let’s assume our comparison rate will be $.073 ($.066+$.007) per kWh.

Shopping Around
When looking around, there are a number of sites available that can help you comb through the offers., for example, has 100+ offers and is run by the PUC. Looking at the deals, the best rate is $.064 a kWh guaranteed for six months, or a savings of $.009 a kWh. On my August bill, that $.009 difference would produce a savings of $5.95. Across six months, we’re looking at an approximate savings of $36.

That’s nothing to sneeze at, but when compared against how much time it takes to find the best rate and make the switch multiplied by how much your time is worth (how much do you make an hour?), you might find that it may not be worth it.

Another thing you have to consider is that most of the rates you see are promotional rates. They are discounted for a time and then rise. It may be a six-month rate with a 12-month contract, with an unspecified rate following the promo and a high early termination fee.

So Where Are The Savings?
PECO is at a historically low rate right now, so on the variable rate plans with promotional pricing, there isn’t a whole lot of savings to be had—especially once you factor in what the pricing will likely be after the promotion runs out. However, there are fixed-rate plans at or close to PECO’s current rate. If you think PECO is priced too low—that oil and gas rates are going to rise in the short term and cause PECO’s rates to rise with it—you may be able to lock in a fixed rate now that will be lower than PECO will be later. But it’s a gamble.

Personally, I look at energy prices every year or so, and my wife and I have never found there to be considerable enough savings to undergo the hassle of switching. The situation may be different for you, though. If you’re considering it, do the math. But before you switch, do all the math.

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