As reported by Save on Energy.com

New Jersey

Electric:

New Jersey opened its electricity industry to competition in 1999. Each of the four electric utilities (PSE&G, Jersey Central Power & Light, Atlantic City Electric and Rockland Electric) now offer customers the chance to save money by shopping for the supply portion of their electric bill.

The utilities sold off their power plants, and now only own the transmission and distribution wires, while also providing “backstop” power to customers who do not shop for electricity. With the move to competition, New Jersey utilities have separated their service into two parts:

• Regulated distribution of power, which is still only provided by the utility, and     • Supply of the electric commodity, which is open to competition.

Customers can choose to receive their electric supply from their utility, or an alternate energy provider.

Customers who do not choose an alternative energy provider are served on each utility’s Basic Generation Service (BGS). The price for Basic Generation Service is determined annually through auctions held by the utilities.

For large customers above 750 kW, called the Commercial and Industrial Energy Pricing or CIEP class, the BGS price is set at hourly prices in the wholesale PJM market. These prices can be extremely volatile, so most large customers choose an alternate (or third-party) energy provider for price stability.

Customers under 750 kW are known as the BGS Fixed Pricing Class, and receive a flat, annual rate from the auction, although it may be seasonally adjusted.

Customers who choose an alternate energy provider still have their power delivered to them by their local utility, and contact their utility for all outage reporting. Customers can choose to receive either a single bill from their utility for their delivery service and energy supply service, or can receive two bills, one from each company.

Our Perspective:

Natural gas prices are near a 10 year low.  Because 30% of electricity is generated with natural gas  we have seen very competitive in this area also.

Deregulation gives the consumer a choice to buy their energy supply on the open market at wholesale prices as oppose to buying energy from the local provider at default prices that are normally higher. If you are not currently buying energy thru a 3rd party provider, it is something you should take the time to look at. Businesses and now residential clients are finding substantial savings by fixing the cost of their electric and natural gas supply cost.

 

To learn more email george@hbsadvantage.com

 

Dave Gardner
Published: April 7, 2010

Age-old questions about the proper role of government are lighting up Harrisburg as the state debates its role in the deregulated market for electricity.

Pennsylvania House Bill 1909, introduced by State Rep. Camille “Bud” George (D-Clearfield), seeks to create an independent Commonwealth Energy Procurement and Development Agency to purchase and sell electricity.

Supporters claim the process would lower rates for electricity and spur development of new generation sources within the state. Opponents charge that Harrisburg has no business becoming directly involved with electric generation.

“What we are proposing is necessary to create real price competition and to build more generation capacity through large contracts,” says George, who has been a vocal opponent of electric price deregulation. “Regional electric pricing is now a reality for consumers and business, yet all of the power comes off the PJM grid. This is a negative for those customers who aren’t located in lower pricing areas.”

According to George, Pennsylvania’s recent deregulation has already proven to be a flawed system because true competition between electric suppliers has not materialized.

He also charges that the public was misinformed about the real consequences of deregulation, and claims that PPL Corporation bought electric plants outside of the state with the money they collected from increased rates. 

“This money should stay in Pennsylvania,” says George. He predicts that the long-term consequences of deregulation will be ongoing rate increases, and that this will force industry to leave Pennsylvania. George also predicts that, through his plan, one cent per kilowatt hour of savings across the board would create a total savings of billions of dollar throughout the state. “We must also help develop new plants for baseline generation,” he adds.

Financial risk?

George Lewis, spokesperson for PPL Corporation, calls the George plan a very large commitment for Harrisburg to assume that would put the state at financial risk. He says this type of risk should only be carried by private investors.

“No perfect electrical model exists, but increasing competition through the free market is the best way to provide competitive prices in Pennsylvania,” says Lewis. “The state will be subject to the same forces PPL and the others companies must deal with, such as unstable fuel prices and environmental regulations.”

Lewis says it is hard to envision how a state agency could generate substantial savings and build and run power plants better than experienced private firms can. He also questions if Harrisburg could ever recover its cost of investment, and says that all decisions by the government authority would be taxpayer financed.

Tyrone J. Christy, vice chair of the Pennsylvania Public Utility Commission (PUC), says the bill is designed to introduce real competition in the state’s electric generation market. He adds that the plan would offer long-term contracts for private investment, thereby enabling investors to take commitments to lenders.

“Our new deregulated market, which is really under PJM control, is doing well with reliability but not with competitive pricing,” says Christy.

He explains that generation prices in the state are now based on the peak natural gas generation price. However, 90 percent of Pennsylvania’s base load is still generated by coal and nuclear power, which Christy calls cheap generation.

Because the generation pricing is based on gas prices during peak periods, profits for the majority of generation are substantial. 

Christy also voices concerns that prices for generation will increase as the American economy improves. He states that market forces will allow new plants to be built only if pricing gets “ugly,” despite the fact that electricity is an essential service.

“Can we wait for market volatility to fix this?” questions Christy. “It is now necessary to build nuclear plants, which cost big dollars, but no one will do this without long-term commitments.”

Christy also takes issue with the impact of deregulated pricing on Pennsylvania’s industrial customers. He says the business plans of these companies were based on cheap affordable power, but these firms have received the biggest price increases since deregulation.

“Yes, I want generation to be profitable, but our industrial base is now paying for huge generation profits,” says Christy. “Are we doing the right thing to retain and attract industry with deregulation? The fact is Pennsylvania is not desirable for industry.”

Disguised promotion?

Robert F. Powelson, commissioner with the Pennsylvania Public Utility Commission (PUC), calls the bill a disguised attempt to promote select rate payers.

“We want 1996 prices in 2010, but the collateral risk inherent in the state becoming active in the electric market will fall on the taxpayers,” says Powelson. “Risk that can produce mistakes should be taken only by private investors.” 

Powelson urges Pennsylvania’s citizens to embrace the competitive market and to pursue tactics in electric conservation. He points to data that indicate 25 percent of the state’s electric users have already switched suppliers, and adds that attempts at regulation in Georgia and Florida eventually produced huge price increases.

“In my view, this bill in Harrisburg is a bad piece of legislation,” says Powelson. “There is no evidence to support claims of price conspiracy here, and if the state were to build generation plants it would be a high risk matter.”

According to Powelson, a mature free market model is now working in Texas, where more than 100 suppliers are making product offerings that include fixed rates, variable rates, and green generation. Additionally, with natural gas prices depressed and additional gas beginning to flow from the Marcellus Shale, power prices in Pennsylvania may drop.

Ray Dotter, spokesperson for PJM, emphasizes that fuel prices are the key to electric generation rates. He states that generation therefore involves fixing risk at a set point. “Prices for contracts also depend on timing,” says Dotter. “Some of Pennsylvania’s local utilities have been criticized for buying contracts at peak times, and that certainly can create trouble. Pricing is cost based and this goes back to fuel costs. Who will actually bear the risk, because fuel costs are an unknown?”

New parameters

Gene Barr, vice president of government and public affairs with the Pennsylvania Chamber of Business and Industry, questions if big government can do a better job of buying energy than the private sector. These concerns are amplified by the fact that the deregulated market is evolving with many new parameters.

Barr also points out that the deregulated telecommunications market is an example of free market success. Before deregulation, costs for long-distance were much higher than they are today and popular cell phone technology had not been deployed.

“Should we entrust energy to the government?” asks Barr. “Government is notorious for making choices with political motivation.”

Our Perspective:

Deregulation was started back in 1998 to help introduce competition to the utility market. In the first couple of years we found opportunity for savings with the mid to large commercial and industrial clients. However, the market turned around 2005/06 and the commodity prices increased.  As a result, it made more sense in some instances to go back to the local providers.

In the meantime, PA put a moritorium on electricity and kept the prices well below market prices. In Jan 2010, PPL openned up the deregulated market and in Jan 2011, Peco will be entering the deregulated market.

The electric commodity market prices are the lowest they have been in the last 4 years. With the openning of the PA market to deregulation, we are currently finding great opportunities for savings in the PPL territory. The price to compare in PPL is currently around $.105 cents per kwh. We are finding opportunities in the mid $.08 cent per kwh depending on the size and usage  of the client. Although this may end up being a higher price that has been paid in the past due to the moritorium on pricing. With the lifting of the moritorium, the local providers will be increasing their prices and as shown, we are finding opportunities to save on electric pricing in the future.

Peco has been buying electric on the open market for the last 6 to 9 months preparing for the intoduction of deregulation in Jan 2011. We are currently waiting for Peco to release their price to compare. It is scheduled to be released by the end of May 2010. Many of the Peco clients are preparing for this transition. Our recommendation is that if you are shopping, do not jump to make a decision until Peco releases their price to compare. This will serve as a basis of comparison to make an objective decision.

Should you like to know more about opportunities for utility savings in the NJ and PA market, email george@hbsadvantage.com or call 856-857-1230.

Current electric rates provide an open opportunity for alternative energy suppliers to communicate with commercial end users in deregulated electric markets.

New utility rules allow alternative electric companies to compete for your business.  Hutchinson Business Solutions (HBS) is an independent energy management solutions provider. We bring together the best electric suppliers in your state to bid on your commercial, industrial  electric supply. If you currently buy your electric from Jersey Central Power and Light (JCP&L), PSEG, Atlantic City Electric, or Rockland Electric Company or PPL in PA, than you have the power to choose your electric supplier and save money on electric. Deregulated electricity gives the customer the power to choose their electric supplier and save on energy.

Your local provider currently purchases electric on the open market at  wholesale prices, they then sell it to you at a retail price. We put our clients in a wholesale position and the savings fall to the bottom line. HBS clients are saving from 10% upto 40%.

Utility bills for electricity now include one total price for generation, transmission, and distribution. Deregulation means the generation portion (the supply) of the electricity service will be open to competition. Your local utility company will remain responsible for providing maintenance, customer services, and billing for the transmission and distribution of your electric.

A long time monopoly system of electric utilities has been replaced with competing suppliers. When competition is present in any market place, the end user benefits. Deregulation of energy markets give our clients the opportunity to compare rates of suppliers, decide who is the best fit for their energy consumption needs, and find savings in the deregulated market.

If you would like to know more about your opportunity for savings email george@hbsadvantage.com