Twenty years ago, Pennsylvania passed a law — the Electricity Generation Customer Choice and Competition Act — allowing consumers to shop for electricity on the open market.
A new report from the Kleinman Center for Energy Policy at the University of Pennsylvania found that the restructuring of the electricity market brought savings for some, but not all.
Before the act passed, consumers in Pennsylvania paid a set price for electricity, determined by regulators. Under the new approach, consumers could shop around.
The commercial and industrial sectors did more shopping than the residential sector, and they saw big savings, driven largely by low natural gas prices. According to the report, it’s not clear whether the residential sector realized any savings.
The residential sector did experience increases in distribution costs, while large consumers saw drops. The public utility commission regulates distribution prices.
Meanwhile, because electricity prices have been largely determined by natural gas, nuclear and fossil fuel generation units aren’t making enough money, producers have said. That has policy implications for the state, according to report author Christina Simeone.
“Pennsylvania can expect requests to increase compensation for these units maybe by returning to regulated compensation for generation or through other policy mechanisms,” she said. “And I expect this is going to be a very contentious issue moving forward.”
Such requests have already happened in other states.