Overview
Pennsylvania was among the first states to enact retail choice and restructure the electricity industry to transition to a competitive market for generation service. Initially, retail competition in Pennsylvania was successful due to various pilot programs across the Commonwealth and the relatively early completion of stranded cost recovery in the Duquesne Light service territory. Strategic Energy has brought Pennsylvania businesses the benefit of retail competition since the inception of retail choice in 1996, and we continue to expand our presence as the competitive market grows in Pennsylvania. However, current rate caps in place for most Pennsylvania utilities have prevented the full development of a robust competitive market.

History and Future of Retail Competition in Pennsylvania
In 1996, the Pennsylvania General Assembly passed the Electricity Generation Customer Choice and Competition Act (Choice Act), which enabled retail choice for all customers in Pennsylvania. The Choice Act restructured the electric industry so that at the end of a transition period, all end-users of electricity would be able to choose their electricity generation supplier. The Pennsylvania Public Utility Commission issues the rules and regulations that govern the transition to a competitive market and has approved transition plans for all Pennsylvania utilities.

The Choice Act and the utilities’ approved transition plans capped utility generation rates during the transition to a competitive electricity market. Because the capped rates in many utility service areas are below wholesale market costs, competitive suppliers, such as Strategic Energy, have been unable to enter many markets, and little customer switching has occurred in most of the Commonwealth.

Duquesne was the first utility that completed its transition period and whose rate cap expired. Accordingly, the Duquesne service territory shows the highest level of customer switching and represents the most competitively active market in Pennsylvania. Currently, according to the Pennsylvania Office of the Consumer Advocate, competitive suppliers serve 47 percent of the load in the Duquesne service territory. Penn Power completed the transition to a competitive market with the expriation of its rate cap in December 2006.

However, rate caps remain in place until the end of 2009 for Pennsylvania Power and Light, and until the end of 2010 for Allegheny Power, PECO, Met-Ed, and Penelec. Currently, customers who do not shop for electricity service from a competitive supplier will automatically receive generation supply from the local utility. The price for that generation service is established differently for each utility. With all utilities in the Commonwealth transitioning to the competitive market by the beginning of 2011, the Public Utility Commission has initiated a rulemaking proceeding to determine how prices will be set for “Provider of Last Resort” or POLR service at that time.

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