Thursday, December 6, 2012

PA Power Prices 7% Below National Average In September: PA's Electricity Competition Success

In 1996, Pennsylvania's average electricity price was about 15% above the national average. And that was the good news then.

Residential rates in the Pittsburgh and Philadelphia metropolitan areas were often among the ten highest in the country, about 50% above the national average at the time, killing jobs and punishing families struggling to pay the bills.

Sixteen years later, times have changed for the better.  In September, 2012, Pennsylvania's average electricity price was 9.76 cents per kilowatt-hour, compared to 10.58 cents nationally, or 7% below the national average.

Looking at the prices for the first 9 months of 2012, Pennsylvania's average price exactly matched the national average of 9.93 cents per kilowatt-hour.  No matter how the data is sliced, power prices are down, and often by as much as 40% or more in real terms.  So what explains Pennsylvania's much improved competitive position on electricity costs?

Some credit goes to the particular price advantages offered by the Marcellus shale, but cheap gas is a national reality and has put downward pressure on electricity prices nationally.

Pennsylvania's electricity reforms that began with the 1996 passage of the Electricity Generation Customer Choice and Competition Act, and the 14-year transition plan to competitive markets that was completed at the end of 2010, are largely responsible for lower power prices.  The competitive markets are working to drive efficiency and innovation. Power plants run more, break down less, and use fuel more efficiently, reducing costs that then make lower prices possible.

Opening the grid to competitors has attracted billions in new investment that shareholders finance, fully responsible for the risks and rewards, and captive ratepayers no longer bail them out, when power plants go wrong. New natural gas capacity and renewable energy capacity in the thousands of megawatts have connected to the grid and boosted supply.

Then booming demand response capacity and energy efficiency have made the demand side of the market really capable of limiting the pricing power of generators.

Rising supply, stable overall demand, and demand that responds to price all adds up to lower electricity prices. Then competition delivers those prices to customers in two ways.  Competitive electricity suppliers deliver competitive power to retail customers who shop for power and default power products pass through competitive prices provided to customers that do not shop.

Indeed, Pennsylvania's successful competitive electricity market reforms have conservatively saved consumers 20 billion dollars since 1996 and provided them with new options, like long-term, fixed priced, green power, and free power day products. Competition is a horn of plentiful, bargain priced power.

For Pennsylvanians, now is the time to choose a competitive electricity supplier and product that fits your needs and desires. When shopping, please take a look at  My choice is a 100% local wind power product.


  1. John, do you have a sense as to how retail power prices have changed compared to the national average in regulated states, particularly the southeast?

    1. I have not done a real analysis. The Compete organization has done such a study. I will see if I can find it.

  2. Here's an somewhat-related piece that came out today from the EIA, looking at how cheaper natural gas is affecting the southeast electric generation markets: