PPL Corporation is an energy company that is headquartered in Allentown, Pennsylvania. It was originally founded as Pennsylvania Power & Light on June 4, 1920, following a merger of eight utility companies but 2023 is giving PPL’s customers a rough start. Electric bills have been much higher than normal. When looking closer into the reasons why, it became shockingly clear that Pennsylvania’s electric deregulation law was the culprit.
It all started when PPL’s computers started estimating customers’ consumption. It seems the estimates were way off base and much greater than their actual usage. When customers called PPL’s automated customer service lines, the situation was compounded due to the frustration they were experiencing when inquiring about their bills.
The utility sent an apology letter to customers, trying to explain why their electric bills increased so dramatically and whether they were estimated or not. PPL had planned to hire more agents to answer their calls and concerns. But these actions did not satisfy the Pennsylvania Public Utility Commission and they have now opened a formal investigation into the true causes of the situation, which could result in fines for PPL.
In Pennsylvania’s deregulated electricity market, PPL is just one of eleven different electric distribution companies or EDC’s.
EDCs are responsible for the electric infrastructure in their service area. They maintain the power plants, the wires, the poles and connections to homes and businesses. Before electric deregulation, these same companies also provided electricity only to the customers in their service area. But electric deregulation changed all that.
Today, the 11 EDCs are still required to maintain the infrastructure of their service area, but consumers and businesses are now free to contract with any approved company as their electric supplier.
If a customer decides to purchase electricity from some company located outside their service area, that company has to pay the EDC(s) for using their infrastructure to deliver that electricity to the customer. So, when you add this transmission and distribution cost with the cost for generating that electricity, an increase in cost occurs. This is due to higher natural gas costs, coal costs, and renewables. You may recall from our blog and newsletter articles that the price of natural gas, alone, has driven up the cost of electricity nationwide by ~14%.
Most Pennsylvanians don’t shop for electricity, around 80% are serviced by the EDC in their immediate service area. However, this is not so for PPL customers, more than 35% of them shop for a cheaper electrical supplier. Why? Because PPL’s rate is much higher than the others, at least 3.4 cents per kWh (kilowatt hour) more. That is an increase of $34 to the average 1000 kWh consumer’s monthly electric bill. The highest rate for six of the 10 remaining EDC’s is 11.25 cents/kWh and three of the companies’ rates are below 10 cents/kWh. According to the latest data available from the EIA, the average residential U.S. electricity price in November 2022 was 15.64 cents per kilowatt-hour.
PPL tells their customers, “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.” However, shopping for electricity is fraught with danger for the consumer. Competitive electricity suppliers are in the business to make a profit, and they entice new customers with low introductory rates. Then they increase the rates after a short period of time, counting on the consumer to stay with their new company.
According to several academic studies – consumers who chose a new electric supplier will most likely end up paying more for their electricity and in some cases much more. This occurred during the infamous polar vortex which impacted Pennsylvania in 2014.
