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Left Navigation    Home   >   Member Services   >   Customerr Choice   >   What Customer Choice Means to You


Over the next several years, consumers in Pennsylvania and New Jersey -- including electric cooperative members like you -- will be able to choose the company that generates their electricity. This means you will no longer have to buy electric power from the local utility that delivers it to your home or business. Instead, you'll be able to "shop for power," if you wish
 
As customer choice goes into effect, your local electric co-op will continue to provide you with information and updates on your rights and choices under the law. But while state regulatory agencies are working out specific details, here are answers to some questions you might have right now about consumer choice.
 

Questions

  1. Does this mean I will still be a Co-op member?
  2. Will I be able to buy electricity from my co-op?
  3. Has customer choice been tried anywhere else?
  4. Will Electric rates come down?
  5. How will customer choice affect co-op community involvement?
  6. Will my electric bill look different?
  7. What are stranded costs?
  8. Will Co-op members be protected from stranded costs?
  9. What other provisions in the law affect co-ops?
  10. What about power supply reliability?
  11. How are utility taxes affected?
  12. What exactly is customer choice?
  13. How will customer choice work?
  14. When will customer choice in Pennsylvania begin?
  15. Will other power companies be able to serve my home or business?

 

Answers
1. Does this mean I will still be a Co-op member?  
  Absolutely! Even if you buy electricity from another state, you will remain a co-op member on co-op lines. You will continue to receive a bill from your electric co-op for various services, like wheeling, that it performs for you.  
     
2. Will I be able to buy electricity from my co-op?  
  Yes. Your local electric co-op will still be able to offer you competitively priced generation, just as it does now.  
     
3. Has customer choice been tried anywhere else?  
  Pennsylvania is the fourth state to enact customer choice. So far, only one -- New Hampshire -- has begun widespread testing to see how it will work. Beginning in April 1997, several private power companies in Pennsylvania will launch pilot programs to see how customer choice will actually operate. Pennsylvania’s electric co-ops may conduct tests of their own. From these experiments, the groundwork will be laid for full-scale phase-in of customer choice, beginning in 1999.  
     
4. Will Electric rates come down?  
  No one knows for sure. Generation costs will almost certainly decrease, just as long distance rates have plummeted since they were opened up to competition in the 1980’s.

However, your overall phone bill has increased over the past decade due to additional services (caller ID, call waiting) that phone companies have added and consumers have taken advantage of. All of these “extras” cost money and only exist because of competition--phone companies trying to outdo each other.

The same types of monthly electric bill increases could result once additional electric services (such as home security systems, appliance sales and maintenance packages) are spawned, and purchased, in a competitive marketplace. But since your cooperative operates on a non-profit basis, it will continue to keep your rates as low as possible.		  
     
5. How will customer choice affect co-op community involvement?  
  Very little. One of the guiding principles of electric co-ops is “concern for community.” Since their beginnings, co-ops have always been involved in providing more than just electricity -- they’ve assisted rural areas with such “value-added” services as distance learning initiatives, rural fire protection and business loan programs, as well as finding solutions to rural wastewater concerns. Co-ops will continue to do these things under electric competition. One result of competition may be that other electric utilities will become more involved in community and economic development. They will need to do this, of course, to better compete with electric co-ops.  
     
6. Will my electric bill look different?  
  Yes, as your bill will need to show “unbundled” charges. Unbundling means that instead of all electricity costs being included in one lump sum, they are broken out separately. Among the unbundled items that may be included on future electric bills are: a generation charge; a meter charge; a transmission service charge; a distribution (or wires) charge; and, possibly, a stranded costs charge, depending on what generation company you buy power from.  
     
7.What are stranded costs?  
  Utilities make investments in power plants, power lines, etc., on behalf of their customers. But when customers buy generation elsewhere, the utility can’t recover the investments through its rates, so the investments become “stranded.” As a result, customers who continue to buy generation services from the utility end up paying for the investments made for departing customers. Of course, fewer customers to spread out costs means higher rates for those “left behind.”

Private power companies can partially offset stranded costs by accelerating depreciation on their power plant investments and reducing the stock dividends they pay to their investors. However, non-profit, consumer-owned electric co-ops can’t do this -- co-op owners are also the customers.		  
     
8.Will Co-op members be protected from stranded costs?  
  Under the customer choice law, electric co-op members that continue to buy generation from their co-op will be protected from higher rates caused when other members leave the system. That’s because departing co-op members -- just like departing customers of other utilities -- will have to pay a “transition charge” to cover power plant investments made on their behalf. The amount of the transition charge will be determined by each utility.

Electric co-op boards of directors -- or co-op members with a two-thirds vote-can opt for PUC review of the transition charge.		  
     
9.What other provisions in the law affect co-ops?  
 
Pennsylvania’s 13, non-profit, locally controlled electric co-ops supported passage of the customer choice law after getting language included that treats them, and you, fairly.

Among the highlights:

  • Co-ops can compete for any customers in the state, just like other electric utilities.
  • Electric co-ops will have to comply with relevant PUC regulations and be PUC-- certified to sell power to customers outside of current service areas, however.
  • Co-ops remain fully exempt from PUC regulation when operating within their current
  • service territories, since they are non-profit, self-regulated and democratically controlled utilities. This saves your co-op and ultimately you -- costs associated with state regulation.
  • Co-ops must continue to serve everyone within their service territories.
  • Co-op members must pay all outstanding utility bills before they can buy generation elsewhere.
 
     
10.What about power supply reliability?  
  Currently, a large percentage of the outages experienced by some Pennsylvania electric co-ops are directly attributable to deteriorated GPU Energy transmission lines that supply power to co-op substations. The customer choice law says that any power company that provides transmission service to cooperatives must maintain co-op reliability at the same high levels provided to other wholesale customers.

The PUC will soon draft regulations covering the inspection, maintenance and repair of transmission systems. These rules should hold transmission-owning companies to higher standards.		  
     
11. How are utility taxes affected?  
  There was concern that lower electricity prices created by competition could reduce the $984 million Pennsylvania receives in electric utility taxes each year. To keep this from happening, the customer choice law rations the state’s Gross Receipts Tax-the utility equivalent of a sales tax -- and supplements it with a formula that will maintain tax revenues at 1996 levels.

The Gross Receipts Tax will also be imposed on out-of-state suppliers as well as on any co-op electricity sales outside of current service areas.

On December 3, 1996, Pennsylvania Gov. Tom Ridge signed the “Electricity Generation Customer Choice and Competition Act,” allowing retail electric customers in the state -- including rural electric co-op members -- to choose the company that generates their electricity. The law gives every Pennsylvanian the power to make this choice by 2001.

Throughout the legislative process, Pennsylvania’s electric co-ops worked to ensure that you, their consumer/members, gained the right to choose your electric generation supplier and that you remained protected from an uncontrolled competitive electricity market.

As customer choice draws closer, your electric co-op will continue to provide you with information and updates on your rights and choices under the law. Anytime you have a question, please call the office of your local hometown electric cooperative-the utility you own, the utility you know.		  
     
12. What exactly is customer choice?  
  Some have termed it “shopping around for the lowest-priced electricity.” Customer choice allows retail electric consumers -- such as homeowners, farmers, small businesses and industries to pick the power supplier, or generator, they buy electricity from. This generator could be your local electric co-op, a neighboring private power company or a licensed firm from another state.  
     
13. How will customer choice work?  
  Choosing an electric generator will be similar to choosing a long-distance phone company. Any power you buy from an electric generator will be transported, or “wheeled,” to your home, farm, business or industry over the power lines of your local electric co-op, just like long-distance calls are routed over the lines of your local phone company.

As with any product, you will probably see advertisements for electric generators on TV, or receive fliers from generators in the mail. And like long-distance service, you may even get annoying phone calls during dinner from companies asking you to switch generation suppliers.		  
     
14. When will customer choice in Pennsylvania begin?  
  Customer choice will begin for one-third of each class of electric consumer (residential, commercial and industrial) on January 1, 1999. Another third will be included by January 1, 2000, with full customer choice in effect statewide by January 1, 2001. The Pennsylvania Public Utility Commission (PUC) has the power to push those dates back by as much as one year if problems arise. Each utility will determine when individual customers become eligible for customer choice during the three-year phase-in period.  
     
15. Will other power companies be able to serve my home or business?  
  No. The customer choice law only opens the generation side of the electric utility industry to competition. Your local electric co-op will continue to serve your home or business, since the responsibility for distribution, or delivery, of power to your doorstep remains unchanged.

By leaving existing electric utility service territories unchanged, the customer choice law keeps electric utilities and other generation suppliers from building costly duplicate power lines into each other’s service areas, facilities that would have to be paid for through higher electric rates.		  
     
     


PA Choice Program

Customer Choice Tips

Consumer's Dictionary for Electric Competition

Electric Generation Supplier (EGS) Information

Price to Compare
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