Key questions, answers about changing service

• How do I switch?

Many retailers are mailing out fliers or calling potential customers, but one important step comes through PPL. Customers have likely already received a letter from the utility asking whether you would like your usage information released to retailers. Without that release, retailers might not be willing to market to you. When you find a company you’re interested in, either call their service number or go on their Web site. Have your current customer number ready.

• Is my bill definitely going up?

Extremely likely. Though retailers are offering plans that undercut PPL’s expected rate of 10.8 cents per kilowatt-hour, their offers are still more than your current rate, which is about 6 cents per kwh.

• Will either PPL or my retailer charge me a fee to switch?

For residential customers, there shouldn’t be a fee from PPL to switch. If you switch between retailers before your contract is up, you might have a cancellation fee.

• Why didn’t I know about this earlier? Why didn’t PPL announce it?

PPL has been very open about the whole process for at least the past three years. If you didn’t hear about it, it’s because you weren’t paying attention. However, it’s getting more publicity now because retailers are starting to market their services.

• Explain the cost-to-compare formula and how I should shop around. Any hidden fees to this that they can slide in later, in order to get a teaser price?

The cost-to-compare data from the PUC is designed to create an apples-to-apples comparison between offers. Any extra fees should be wrapped into that. You might consider Direct Energy’s price structure a teaser, but they’re announcing it up front.

• Years ago, there was some sort of switching thing for power, but it fizzled out. Could I have switched months ago, or is this new?

You could have switched any time after deregulation went into effect in 1997. However, rates skyrocketed, and rate caps became the lowest price around. Now that the caps are expiring, retailers are returning because rates are finally at prevailing market levels.

• When will all this switching occur?

When you sign up to switch, you will remain with your current company until the end of your current billing cycle (the day of the month that your meter is checked should be on your bill). After that, you should be switched.

• Do I get to pick the date and time?

No, but it shouldn’t affect anything. The switch is just an accounting thing.

• Will my service from PPL change?

No, because you’ll still be paying for its service as a utility. Your bill is made up of three charges: generation, transmission and distribution. Generation is the part that’s now unregulated that you can shop around for. The only thing that changes is who’s selling your power to you. What you pay – and who does the work – for getting the power to you and fixing problems is the same as always. Call PPL.

• If I buy from a company that’s not from the area, how will they get the power to me?

Because electrons are basically an untraceable commodity (similar to, say, an individual grain of wheat), the actual source of the power to your house is usually defined by physical characteristics – where the closest plant is, where the heaviest current demand is locally. The easiest way to get power there is usually the way the grid managers do it. However, your use will be tracked and billed by a different company. Say you bought a book from an online store. Though the company is based somewhere, it likely has distribution centers around the country. You would get your book from the closest center because it would get to you to fastest.

• If the energy is going through PPL’s lines and it’s billing me, how does my retailer get paid and will PPL add fees to my bill?

No, PPL’s job as the utility is to pass on any payments for electricity generation to the company contracted by the customer. That’s state mandated through the 1996 deregulation law. Statutorily, PPL isn’t allowed to gain a cent from generation. However, a recent decision by the state Public Utility Commission allows retailers to pay PPL to handle the billing and accounting for their customers. Generally, this works by PPL collecting the payments and passing along all but 1.37 percent of it to the retailer.

• Why would PPL make its energy cost more than others?

PPL is charging what it contracted to pay for the energy through the open market. It just so happens that PPL began buying this energy when prices were high; they’ve since falling precipitously. PPL did this to hedge its bets: By buying over a long period of time, it hedged against price increases, but also prevented itself from taking advantage of price drops. Retailers are buying all the time. Therefore, the power being bought for PPL customers is mostly from that cheaper supply. PPL is buying now for 2011; it will likely have more competitive prices next year – if prices remain low.

• Won’t losing customers hurt PPL?

PPL Electric Utilities – the specific part of PPL that delivers energy – never saw any profit from the “pass through” to the retailer. Therefore, it doesn’t really care where customers get their power.

PPL Corp. is an umbrella for three smaller companies – the utility, the side that makes the power and the side that sells that power to the utilities. They’re all under the same corporation, but, per federal rules, must interact at “arm’s length.” PPL Generation is the one that gets paid for the power, not the utility, so PPL’s goal is to sell its generation on the open market for as much as it can. The utility side is just there to make sure the lines to your house stay up so that you can continue to use power and they can continue to bill you.

• If the same company is delivering the power through the same lines, what changed?

The price and who sold it. The energy you receive will likely come from the same source it normally does. An organization called PJM manages where energy comes from and who it goes to. Think of PJM as air-traffic controllers: They manage energy flow from producers to users in the Mid-Atlantic region, attempt to avoid bottlenecks and forecast long-term issues and potential solutions. Think of your bill as buying the right to use electricity. Your new supplier is simply selling that right to you cheaper than PPL.

• What if there is high demand? How do they get extra power for people?

There are two sides to this answer. On the purchasing side, there are energy sales every hour, so a company that hasn’t contracted for enough can always make up the difference – albeit at a higher cost. On the production side, plants don’t always run at 100 percent. In fact, most don’t for the specific purpose of ramping up quickly to meet high-demand periods. It’s called “cycling” and PJM regulates it. There are also plants called "peaking plants," usually quick-start places like natural-gas turbines or hydro-electric dams that aren’t on usually, but can be turned on almost immediately.

• Now what happens when I switch to another retail provider?

The cost for the generation portion of your bill will change. You might also have a cancellation charge for the contract you didn’t finish.

• Explain how my electric bill is calculated.

There are three parts: The distribution is your payment to PPL to upkeep local lines in your town and home; generation is the actual cost you pay to your supplier for the power you use; transmission is your payment to upkeep the large high-powered lines and what it costs to reroute power, prevent blackouts and other potential problems. Basically, it’s the insurance part of your bill.

• If these suppliers are their own power company, like Dominion, can’t they just make their own power?

They do, but they sell that to people who live closer to their plants (less line loss, less distance). Also, remember the “arm’s length” thing; Dominion is under the same restrictions that it can’t simply buy from itself. It needs to solicit bids from the market. Beyond that accounting stuff, the actual physical routing of power is left to PJM. Think of it as a bunch of farmers throwing their corn into a pile. Each one brings the corn they’ve agreed to sell at a certain price, and each customer that bought stuff shows up to get their order.

PJM divvies from that big pile, and everyone’s happy. Electrons are the same, so it doesn’t matter where they came from; they’ll still turn on your TV. What might matter to you is how they were made, who made them and whom you might be subsidizing with your order, but you might never know that. One thing you can control is whether your energy came from renewable sources, but you’ll pay extra for the benefit.

• How can a supplier buy power if it does not know how many people will switch?

Power is produced and sold every day, around the clock. In fact, PJM has auctions every hour, called "spot markets."

Buying on the spot market is usually more expensive because it’s a last-minute deal; it involves a certain amount of risk for generators because if it’s not bought, it costs them money (current battery technology doesn’t allow for storing much energy, so it has to be used as soon as it’s created). Longer-term buys pose more risk for the purchasers, utilities, because they assume they’ll have the customer demand to fill the order. That, however, also makes them cheaper, and allows utilities to offer lower prices (unless, of course, current prices plummet). Companies usually keep a portfolio of long-, middle- and short-term contracts to hedge against all potential outcomes.

Just like the stock market, there are many ways to structure deals, which is why energy companies have armies of accountants, managers, buyers, sellers and risk assessors.

• How can they guarantee a price for me?

Retailers have already secured enough contracts for the future to get a pretty good idea what they can charge you and still make a profit.

• Do I need to get a new power meter?

No. PPL already installed "smart meters" for its customers, which means you can track your usage and potentially receive money back if you install alternative energy sources, like solar panels or a wind turbine.

• One bill or two for power?

One bill, as long as they participate with PPL’s internal accounting programs.

• I heard there is some transport fee to get power to customers? Any other goofy fees, or will PPL increase its other fees?

That transport fee is likely either the distribution or transmission part of the bill, or both. Both are still regulated and can only change if PPL requests a change from the state PUC. There shouldn’t be any other unexpected fees, unless you switch to another supplier.

• I also envision myself being at the back of the line during an outage.

You’ll be at the same part in the line as everyone else because PPL wants you to use power so it can sell more.

• What will my rates look like after this year? Will I keep needing contracts after one year, or am I just there month to month and can switch back at any time?

You can’t predict 2011 rates (though PPL has started buying for then and released some figures on its site). It’s all a matter of the market, like stocks.

Unless you contract for a longer period, you’ll need to keep signing contracts each year. Retailers may offer contracts with shorter periods, but they’ll be contracts. Switching can be done, but beware of cancellation fees.

• Will I be required to change to a time-of-day usage account at any point?

Time-of-day accounts refer to a type of variable-rate billing in which customers pay less than average during low-use periods and more than average at peak periods. Currently, there are no companies offering this, much less making it mandatory. However, it’s a good option for people who aren’t home during peak periods (afternoons in summer; evenings in winter, sometimes winter days) because you’ll get cheaper power when you are home, or if you can schedule energy-intensive things like clothes washing and drying when rates are lower.