Understanding the importance of competition when it comes to elctricity

This article, "10 Reasons Why Electricity Rates Vary in Texas", is a must read for everyone in Pennsylvania who pays an electric bill. On December 31st, 2010 the price caps set by the state Public Utility Commission came off. So it is important for consumers to understand just how electricity costs differ when it comes to shopping around. This article explains why rates vary in parts of Texas which could be the case here in Pennsylvania soon.

The rate you pay for your electrical power in Texas can vary from one household to the next, even within one neighborhood. Texas electrical service has been ‘de-regulated’, which means that the customers may have more voice in selecting where they power comes from and how much they pay. Below are ten of the factors that can cause electrical rates to vary in Texas.

1. Choice – The biggest reason for the variation in rates is the freedom for most Texan’s to choose their own source of electrical power. This creates competition for customers.
2. No choice – There are some municipalities and electrical cooperatives that have chosen not to give their customers a choice in providers. If you live in one of these areas, your rates will be determined by your local provider.
3. Aggregation – These are cooperative buying groups. Members can join these groups to gain the benefits of being able to negotiate lower rate prices from electrical suppliers because of their representation of a larger group of consumers.
4. Brokers – An electrical power broker is a sales or marketing agent for retail electric providers. These brokers put together marketing strategies for enticing customers to sign up with the REP’s they represent. The brokers earn commissions from the REP’s for each new customer they enlist. These commissions naturally will figure into the cost that these supplier’s pass on to their customers.
5. Green Power – When Texan’s look at their choice of power suppliers, they will see that some electricity is generated by 100% renewable energy sources and others only have a portion of their electricity generated by renewable sources. The amount of renewable energy and the type of renewable energy that is used can affect the pricing of the electrical power it creates.
6. Rate Plans – In addition to choosing our electrical supplier, suppliers also offer different types of rate plans. There are variable plans, in which your rate per kilowatt may go up or down from month to month. There are also fixed rate plans, where you are guaranteed a set rate for a period of time, usually 6 or 12 months.
7. Minimum Usage charges – Many suppliers have minimum usage charges. This is a base amount that you will be charged each month, even if you are not using that minimum amount of electricity. These charges can vary from one supplier to another.
8. Electrical Suppliers There are many differences between the different electrical suppliers that consumers can choose from in Texas. The Texas PUC has set up a website called Power to Choose that provides information to assist consumers in comparing their electrical power options.
9. Different fuels – One of the factors in the price of electricity is the type of fuel used to generate it, and the costs involved with that production. Electricity can be generated by wind power, nuclear power, coal and a variety of other options.
10. Location – Where the electrical power plants are located also affects the price of the electricity they supply. Not all the electricity used in Texas is generated by power plants located in Texas.
    

All these different factors affect the prices that Texans pay for their electricity. To simply choose a supplier and a plan can be quite a process of education in itself.

Creating an environment for a real electricity marketplace to emerge in Pennsylvania depends on consumers who can spur competition -- and reduce their electricity bills -- by taking the time to shop for electricity and practice better energy conservation. Remember in the 1990's the average PA electric bill was 15% higher than the national average. Again we see another case of 'de-regulation' and market forces solving the problem.