Restructuring and the Competition Act
The restructuring of the electric industry began in the early 1990s in several states across the United States. Prior to restructuring, electric utilities provided their customers with generation, transmission as well as distribution of electricity. Restructuring enabled customers to select suppliers competing in the market to provide the best prices, and allowed customers the opportunity to choose other energy options, such as conservation, efficiency and alternative energy programs. In Pennsylvania, the Competition Act promoted these developments.
The Competition Act:
- Provided customers with a structure that allowed them to choose their electric generation supplier ("EGS"); these customers no longer have to purchase their generation from their local electric utility.
- Required electric utilities to separate the generation, transmission, and distribution components of their rates. This provided customers transparency in the utilities' pricing and allowed customers to compare prices between electric distribution companies ("EDCs"), like PECO, and EGSs.
- Allowed electric utilities to separate their generation and distribution functions. This created competition for generation, and provided generation companies with an incentive to become more efficient and innovative to provide energy at a lower cost.
- Put into effect transitional rate caps along with related restructuring settlements, which kept generation, transmission and distribution rates fixed for a period of time determined for each utility by the Pennsylvania Public Utility Commission ("PaPUC" or "Commission"). Transitional rate caps aimed to ease the shift from regulated rates to market prices by customers.
The rate caps were not meant to be a permanent regulatory alternative to market prices. PECO's transmission and distribution rate caps expired on December 31, 2006, while its generation rate caps expired on December 31, 2010.
PECO's Default Service Obligations and the Procurement Process
PECO is currently the provider for electric generation service to all customers in its service territory who do not select to take service from an EGS or who return to take service from PECO after being served by an EGS. PECO retained this obligation to serve all customers who do not select to take service from an EGS or who return to take service from PECO after being served by an EGS when rate caps expire. This service is called Default Service and PECO is the Default Service Provider.
Starting in 2009, PECO has procured electric generation supply for its default service customers through a competitive procurement process pursuant to a Default Service Program approved by the Commission. PECO’s first Default Service Program (DSP I) concluded with the Fall 2012 solicitation.
The Commission approved the competitive bidding process under PECO’s second Default Service Program (DSP II) in its Order dated October 12, 2012 in Docket No. P-2012-2283641. There are five (5) solicitations under DSP II that will select electricity suppliers to provide Default Supply for the period June 1, 2013 through May 31, 2015, and for a portion of the Company’s requirements for the period June 1, 2015 through November 30, 2016.
For more information on PECO's Default Service Program, please see the Regulatory Process page.