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RESA Blog: State of the State: Pa.

Pennsylvania consumers have enjoyed choosing their electric service provider for the last 25 years. But for all it has accomplished over the years, electric choice isn’t keeping up with technology, market trends, or consumer demands and expectations.

Consider that in roughly the same amount of time, states like Pennsylvania restructured their electric markets — cell phones have evolved from the Motorola clamshell StarTAC through 32 versions of the iPhone. Many of us remember when we paid 25 cents per text, while today, we have unlimited, flat rate voice, data and text plans.

Comparatively, the competitive market has some work to do. Things are much different today than they were 25 years ago when we were using Netscape and AOL.

What consumers were promised — when markets were restructured — isn’t what we have today, and frankly, it’s disappointing. Yet, despite the need for real reforms, let’s not overlook the benefits competitive markets have brought consumers.

From 2008 through 2020, the weighted average price of electricity in states with retail choice has fallen by 7.4%, while the weighted average price in monopoly states has risen by 21.1%.

Driven to lower their energy costs and take advantage of innovations that competition brings, a high percentage of commercial (40%) and industrial (80%) consumers in Pennsylvania participate in the competitive power market for savings and control over their energy usage and monthly bills.

Competition also empowers consumers who want to see a transition into a greener and more sustainable economy and makes renewable energy more accessible. While customers may not be able to put solar panels on their roof, for example, they can choose a supplier that provides 100% solar-generated power.

These are just a few of the benefits of a competitive marketplace. More is certainly possible, but changes must be made to the existing regulatory setup. Several issues are driving the renewed call for meaningful reforms. The most recent of which is the sharp increase in energy costs that non-shopping (default service) customers in Pennsylvania experienced on June 1, 2022, when utilities hiked rates between 6% and 45% to adjust for electric generation.

So, what can we do to revitalize the competitive market to give consumers more (and better) options? Here are just a few ideas:

Supplier Consolidated Billing: Customers prefer simplicity. Receiving one bill from their chosen retail supplier that covers the cost of the product and the delivery makes the most sense, rather than the utility trying to singularly control the customer relationship.

When you order a product from Amazon, you don’t get billed by FedEx or UPS separately for delivering the package. You get one bill from Amazon with the shipping charges included. Your bill should be no different when you order a product from an energy supplier.

Maryland has separated itself from other states by boldly embracing Supplier Consolidated Billing. Other states, like Pennsylvania, should follow their lead.

Legacy of Default Service: Another opportunity for improvement is reconsidering the legacy utility’s role in providing a default service. This was supposed to be a temporary backstop until markets matured, but it has become a permanent fixture that stifles innovations and market growth. When legacy utilities remain the default provider to customers, they retain control over how energy is procured for that customer.

Right now, consumers who don’t choose their electricity supplier, roughly 75% of all residential customers, automatically default to their local utility company. When they do, these regulated monopolies have little incentive to invest in innovation, efficiency or customer service. It is time to revisit the role of default service in today’s marketplace and re-evaluate if there is a better way to encourage customers to participate in the competitive market.

Ease of Shopping: Consumers need to be empowered to shop for their energy supplies just like they do other services. While competition is part of the everyday experience for many things like cable, Internet and cell phones, shopping for electricity still is not common practice for most consumers.

Making it easier for consumers to choose and switch suppliers should be painless— rather than requiring hard-to-find account information, customers should be able to enroll with accessible and verifiable identification such as a phone or driver’s license number, as they do with many other services like cable television and cell phone plans. Currently, there are too many hoops for consumers to jump through if they decide to take control and choose a new supplier.

Change can be a good thing: When it comes to energy choice, it’s time to take the next step forward and implement more innovative policies. Unless the competitive market evolves, it will eventually be the last Blockbuster video store in a marketplace where everyone is streaming Netflix, Hulu and Prime. And we know how that story ends.

Contributors: Kristina Montgomery and Tony Cusati