PECO Energy Co. will turn over 20% of its residential customers to New Power Co., a unit of TNPC Inc., as a result of a competitive bid, ending a dispute with Green Mountain Energy Co.
The reduction was a condition set by the Pennsylvania Public Utility Commission (PUC) for PECO to merge with Unicom Corp. The companies merged Oct. 20 and were renamed Exelon Corp.
The settlement and the merger agreement specified PECO would design a plan under which at least 20% of its customers would served by other electric providers.
After consumers were free to choose alternative electric suppliers, they didn�t do much shopping around in Pennsylvania. Only 528,000 customers, or 9%, of the 5.4 million total customers switched to alternative providers, according to the Pennsylvania Office of Consumer Advocate.
Consumers in PECO�s territory shopped around a little more but not enough to satisfy the settlement agreement. As of July 2000, only 15.81% of PECO�s residential customers were served by an alternative supplier. In PECO�s territory, experts say, the guaranteed default rate capped until 2006 was simply too low for competitors to beat.
To get more customers to switch, PECO and the PUC agreed PECO would sponsor a competitive bidding process to select an alternative provider for 299,000 customers. Once a provider was selected from the bids, customers would be selected randomly from PECO�s default customers. They could opt out of the program and remain with PECO and there would be no penalty for returning to PECO�s service.
�We put out an RFP [request for proposal] last summer but got no bidders,� says Michael Wood, spokesman for PECO. �So we agreed to keep the customer service function and then got three bids. But none of these included discounts.�
Three bidders were New Power Co., Shell Energy Services, and Green Mountain Energy Co.
Without discounts, no customer would have an incentive to switch from PECO, Wood says. The bid conditions were changed and Shell and New Power submitted revised bids. The company selected New Power, a selection approved this week by the PUC.
The contract is to provide �competitive default service� for 3 years at a 2% discounted fixed regulated rate, he says.
Green Mountain Energy contested the decision, but regulators ruled the outcome of the bidding process was acceptable clearing the way for the bid process to be finalized and the customers selected.
New Power said it is working with Green Mountain and PECO so Green Mountain can serve a portion of the new contracted customer base.
Other Pennsylvania utilities that haven't succeeded in getting many customers to switch to other suppliers as part of their settlement agreements are pursuing similar such bidding processes. PPL Electric Utilities Corp. is looking into the bidding process, sources say.
Just 2.3% of PPL's residential customers and 3.5% of its entire customer base have switched to other providers since deregulation began in Pennsylvania in 1999, according to Pennsylvania�s Consumer Advocate.
The PUC also ordered Duquesne Light Co. to develop a plan to deal with its default customers who have not switched to other providers when it approved Duquesne�s plan to sell its generating plants last spring.
