Consumers deal with skyrocketing electric bills

March 1, 2014
Gilbert Roth of Marianna shows his $930 electric bill for January. He expected a big bill, but not that big. - Jim McNutt / Observer-Reporter Order a Print

When Gilbert Roth opened one of his three electric bills last month, he admits he was shocked to see the $930 charge for January usage at an apartment he rents in the Marianna area.

The size of the bill Roth received is being replicated thousands of times across Pennsylvania as many residents continue to try to stay warm in one of the longest winter cold snaps in recent times – and pay dearly for it.

The lengthy cold spell that began in mid-January and continued through most of February, propelled by an arctic vortex out of Canada, has also created a perfect storm of skyrocketing electric rates.

The real culprit though, according to the state Public Utility Commission, is variable rate electric generation products offered by some electric service companies. The variable rates are highly sensitive to prices paid for fuel during times of extremely high demand.

The shockingly high electric bills have raised umbrage among many consumers who have complained to the PUC.

The ire over the bills has also drawn the attention of the Office of Attorney General’s Bureau of Consumer Protection and the independent Office of Consumer Advocate.

According to a news release Wednesday from Attorney General Kathleen Kane, whose office has also received hundreds of calls and complaints from consumers about dramatic spikes in their electric bills, complaints suggest that in some circumstances consumer electricity costs increased as much as 300 percent in recent months. Many of the consumers affected appear to have recently switched to variable-rate pricing for their electricity.

When the PUC announced Feb. 20 it had opened proceedings to examine the rules, policies and consumer education measures regarding variable-rate electric generation plans, it based its decision on more than 750 high bill informal complaints it received.

“The rate consumers pay in the retail electric market is governed by the terms of their contract with their supplier,” said PUC Vice Chairman John Coleman Jr. and Commissioner James H. Cawley in a joint statement. “It is important for consumers on variable rates to carefully review the terms and conditions of their contracts to determine if they are at risk for large rate increases at any given time.”

On Tuesday, PUC spokeswoman Jennifer Kocher said in the four days since the Feb. 20 announcement, the number of complaints had nearly doubled to 1,468.

But with a second round of subfreezing temperatures that plummeted to single digits before the end of last week, the commission and the AG’s office may be girding for many more complaints.

Roth, who uses West Penn Power’s budget program to level out monthly electric costs for his home and barn, and is not a variable-rate customer, said he had earned $400 in credits that will help him offset some of the costs of the bill he received for the apartment, which he said has a newer furnace and a heat pump, but may need more insulation.

‘A perfect storm’

Attorney General Kane’s office noted that many factors may contribute to increased electric prices, including increased usage during a particularly cold winter season and rate fluctuations. Kane noted, however, that price gouging – increasing prices above any increased costs – during a state of emergency is prohibited in Pennsylvania. Gov. Tom Corbett declared a state of emergency on Feb. 5.

The PUC’s Kocher said events of this winter combined to create “a perfect storm” for escalating rates.

First was the extended cold spell that began in January that put increased demand on the electric grid, which in turn caused prices on the wholesale energy market to increase significantly.

According to Kocher, that increase forced many suppliers to purchase energy on the spot market, as opposed to suppliers that purchased fuel on long-term contracts and were less susceptible to price spikes.

Kocher also noted that while the PUC regulates pricing for energy in the state, it doesn’t have complete control of electricity prices when it comes to the electric grid.

The grid, as far as most of Pennsylvania and all or parts of 13 other mid-Atlantic and midwestern states are concerned, is operated by PJM Interconnection LLC, which serves 61 million people.

Historic electric use

In late January, a PJM spokesman noted that in its 87-year history, seven of the 10 days of highest use of electricity in its history had occurred during that month.

On Jan. 28, PJM asked consumers to conserve electricity during peak usage times. A week earlier, the operator asked the Federal Energy Regulatory Commission for emergency approval to exceed a $1,000 per megawatt-hour price cap on power. The average wholesale price in the PJM region in 2013 was $42 per megawatt-hour, according to the Energy Information Administration.

The move drew criticism from state Sen. Tim Solobay, D-Canonsburg, and state Rep. Pam Snyder, D-Jefferson, who noted that PJM member FirstEnergy in October closed its Hatfield’s Ferry coal-fired plant in Greene County and the Mitchell plant in Washington County.

The two legislators wondered why the plants couldn’t have continued to operate during the winter, arguing that the additional megawatts of power might have helped lessen the price spikes from the lengthy cold winter.

Their stance was bolstered by a state study from the American Coalition for Clean Coal Electricity, that found that 49 percent of Pennsylvania households now spend an average of 19 percent their after-tax income on energy. It also found that energy bills for the poorest Pennsylvanians take as much as 72 percent of their family incomes.

The results prompted John Pippy, chief executive officer of the Pennsylvania Coal Alliance, to reiterate his call for legislative hearings to find out why costs are increasing and why PJM didn’t have access to reasonably priced wholesale power during the recent cold weather.

In a news release, Pippy said new standards on coal-fired plants imposed by the Environmental Protection Agency failed to take into account “what is achievable with current technology.”

“As a result, the federal government is unilaterally taking coal out of the nation’s energy mix, much to the detriment of Pennsylvania’s economy and the state’s energy consumers,” Pippy said that coal-fired electricity is significantly more affordable than some other energy sources, and much less susceptible to wild price swings.

In the meantime, the PUC is urging consumers to contact their supplier, check their contract, evaluate competitive offers, conserve energy and sign up for budget billing, a payment arrangement or assistance programs.

In addition to enhancing its consumer education initiatives about variable rates, the PUC said it is also is continuing its ongoing efforts to enable customers to more quickly change generation suppliers when they are charged unacceptably high rates.

But those efforts won’t be able to head off February’s electric bills, which will be issued later this month.

“I’m scared to death to see what the next (month’s) bill will be,” Roth said Tuesday.

Michael Bradwell has been business editor for the Observer-Reporter since 1995, and was named editor of The Energy Report in 2012. He joined the newspaper in 1990 as a general assignment reporter in the Greene County bureau and has also worked as a copy editor. A 1974 graduate of Pennsylvania State University with a degree in English, he began his career at the Bedford (Pa.) Gazette. Prior to joining the O-R, he served as public relations director for Old Bedford Village, account executive at two Pittsburgh public relations agencies and copywriter for the country’s largest wholesaler of mutual funds.

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