This is one half of a point-counterpoint discussion — read the other half here.

John Hanger in his column in Broad+Liberty on December 26 (“Energy competition works—and should be expanded”) would have you believe that giving residential customers the ability to choose their supplier of electricity has significantly lowered the cost of electricity. While he does not actually say that, he does imply it. Of course, it is not true. Nor is it true that “Shopping for electricity and comparing electricity product offers” is easy. 

First of all, electricity is electricity. It doesn’t come in different colors, shapes or sizes to customers’ homes. It doesn’t matter who your chosen electric supplier is. No matter who has generated the electricity it all comes down the same wire and is not differentiated by supplier. It is not like going to the grocery store to buy coffee. With coffee one has a choice of ground or whole bean; regular or decaf; dark, medium or light roast; and numerous brands. But regardless of the suppliers from whom you and your neighbors could choose, the electricity coming down that wire to all of your homes is the same. When you shop for an electricity supplier you are essentially shopping for the lowest price. And, that is not easy.

While it is true that ending the generation monopoly of PECO by the Electricity Competition and Customer Choice Act in 1996 was beneficial, the benefit was not due to giving customers a right to choose their supplier. The benefit was due to ending “regulated monopolies for the generation of electricity.” Hanger does say that in the first three sentences of his column, but obscures it by focusing on “giving customers the power to choose their electricity supplier” for the remainder of his column.

What has happened since 1996 is that the cost of generating electricity has been lowered in many areas of the country, as Hanger himself has stated elsewhere “as a result of low-natural gas prices, stable or even declining demand, and increased supply substantially from new renewable energy generators in regional power pools around the country.” Elsewhere he has also stated that “In most markets, the price of natural gas determines the wholesale price of electricity, and all consumers use electricity.” He has also explained why wholesale electricity prices are low. “Declining electricity demand, rising wind and solar production, and massive shale gas supplies . . . have driven down gas prices since 2008 . . . .”

If one looks at the statistics, it is easy to see that residential customers choosing their electricity supplier could not possibly be the cause of lower electric rates. As of November 2023 only 24 percent of residential customers have switched their electric generation supplier according to the Pennsylvania Public Utility Commission. Indeed, the number who have switched is less today than Hanger, in October of 2012, reported had switched. He reported then that “more than 1.86 million Pennsylvania electricity customers” had switched. According to the November 2023 PUC report, only 1.57 million have currently switched. 

If there was an advantage to switching, one would have expected the number of customers switching to have increased since 2012. Instead, almost 300,000 fewer have switched in those years. There must be a reason for the decline. I submit that shopping around is not easy. 

Hanger stated that “recently there were 117 competitive offers in the PECO area.” He says that all you have to do is go to “www.papowerswitch.com, enter your zip code, and see how much you may be able to save.” When I enter my zip code it shows 145 results. I can narrow that down by choosing certain options, but how do I know which of those options will give me the best rate? Some of these have a rate higher than PECO’s default rate. Some have a monthly service fee. Some have a cancellation fee of $150. I have to choose between a fixed rate, a variable rate, or an unlimited rate. I have to choose a term limit. And for each of the suppliers there is a box to click that says “See offer details.”

According to the November PUC report only 24 percent of residential customers have switched. Fewer than 40 percent of commercial customers have switched. Only for industrial customers is the percentage who have switched greater than 80 percent. 

If switching is so easy and the savings so significant, why haven’t more customers switched in all those years that the freedom to choose has been available? Perhaps it isn’t so easy for the typical customer or the savings aren’t worth the effort. Unless one is careful one could find that after the initial term at a fixed rate they are switched to a variable rate that in a short time wipes out any savings during the initial term.

The best question to ask, however, is why doesn’t the law simply require PECO to shop for the best rate, pass that along to its customers, and relieve the customers of the obligation to shop? After all, we are buying electricity, not coffee.

Howard Lurie is Emeritus Professor of Law, Charles Widger School of Law, Villanova University