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Businesses on default electric pricing could get burned

If your business has not shopped for electricity supply, some important information follows.

If your business has not shopped for electricity supply, some important information follows.

In January 2014, eastern Pennsylvania was shocked by prolonged extremely cold temperatures. Known as the polar vortex, the weather played havoc with the PJM Interconnection, which is Pennsylvania’s electric grid provider.

The extreme cold reduced the output of electricity power plants by freezing cooling towers and interrupting flow through hydroelectric dams just as many folks with electric heat and heat pumps were increasing their electricity demand.

The PJM grid took extreme measures to maintain reliability, and wholesale electricity prices approached $2 per kilowatt-hour, when the normal price was more like six cents. This was devastating to local utilities because they were required to serve their default service customers, those customers who did not shop for electricity supply at the normal price while wholesale prices they paid increased by 3,000 percent.

Many Pennsylvania businesses have shopped for electricity and signed contracts with electricity suppliers. Any number of plans are available depending on how much electricity you use and how much risk you want to take.

Generally, you can save money by shopping for electricity, but many small business and commercial accounts, typically paying less than $5,000 per month, stay on default service because the savings are not worth the time it takes to understand and shop for electricity.

It took some time, but the last of the utilities that serve the Greater Lehigh Valley, Philadelphia Electric Co. or PECO, has received permission from the state Public Utility Commission to shift the risk of the volatile energy component of default service bills to small and medium-sized business customers.

It can do this by placing any account with a distribution tag of more than 100 kilowatts on a variable pricing product. PECO joins Met-Ed and PPL Utilities in shifting the risk to ratepayers as of June 1.

Many on default service say that, despite the cost, they trust the utility as the safe way to procure electricity.

This benefited these accounts during the polar vortex in January 2014 and the mini-vortex in February 2015. Most ratepayers on default service did not notice the vortex; it did not affect their bills as much as someone on a variable pricing product.

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