Scott Hudson: State Must Update PA’s Electric Choice Program

by Scott Hudson, President, Vistra Retail
Published May 5, 2021

Pennsylvania consumers have had the option of choosing their electric service provider for last 25 years, since enactment of the Electricity Generation Customer Choice and Competition Act of 1996. And by every measure, the state’s electric choice program has been a success, driving down prices and giving consumers more convenience and control.

Before competition, average Pennsylvania electric rates were 15% above the national average. Now they are about 7% below that average. Clearly, competition works.

But as successful as Pennsylvania’s electric choice program has been, it is stuck in the past. After more than two decades, it is time for the state to take the next step and implement more innovative billing policies and program enhancements that will revitalize the competitive market and strengthen consumer choice and protections.

The potential for growth is tremendous. According to the most recent data from the state Public Utility Commission, 82% of industrial electricity consumers shop for their electricity supply. But the percentage of residential customers enrolled with a supplier is dramatically lower at only 27%.

One way to enhance consumer choice is to implement policies such as supplier consolidated billing (House Bill 548), which would position Pennsylvania to realize new levels of product innovation by allowing the retail supplier that is providing the electricity to consolidate all costs onto one bill, including utility costs, and invoice the customer directly.

Right now, the retail electric billing process in Pennsylvania is reversed. Instead of paying the retail supplier for your electricity, you pay the monopoly utility that transmits the energy product to your house. That’s confusing. As a consumer, when you order online or shop in store for home delivery, you pay the retailer, which coordinates delivery of the product. You don’t pay the U.S. Postal Service, UPS or FedEx for your product.

Your electric bill should be no different.

Supplier consolidated billing is not some new concept. Many companies perform their own billing functions. The Maryland Public Service Commission recently adopted regulations to establish rules and regulations to implement supplier consolidated billing in 2023. Pennsylvania should do the same.

Exceptional customer service is the foundation of competitive electricity markets, because suppliers have to earn every customer every day. And having that customer relationship is essential for innovation.

Retailers can offer consumers a wider range of products and services, not a single default rate, as utilities do. Price may be the reason consumers enter the retail choice market, but it’s not why they stay. Many customers, for example, may want 100% renewable energy and are willing to pay more for it. By choosing a supplier, consumers vote for a value proposition that matters to them — whether that’s price, the amount of renewable energy supplied, product innovation, the level of service they receive, a company’s reputation or a combination of these factors. But in the end, it is their choice.

Consumers also want convenience. Spurred by competition, electricity suppliers have introduced innovations to make convenient and personalized customer experiences possible. For example, many innovative products — like providing 100% solar power to consumers during the day and then totally free electricity at night — are not available in Pennsylvania because the suppliers do not control the billing, another reason supplier consolidated billing is so important.

Suppliers also help customers mitigate up-front deposits upon acquisition, adopt unique product structures that better suit their lifestyles and make flexible payment arrangements on their bills. Pennsylvania’s strong consumer protections enhance these offerings. But the common element underlying these solutions is the supplier’s ownership of the invoice and credit relationship with the customer.

Competition is really about control. Competition trusts consumers to know what they want and to seek out those plans and services that provide them with the best overall value. For that to happen, Pennsylvania’s electric choice program needs to keep up with consumer demands, technology and market trends.

Scott Hudson is president of Vistra’s retail division, whose providers Dynegy, Better Buy and Brighten Energy serve customers in Pennsylvania.