For Third Straight Week, Pennsylvania Shopping Growth Stalls; Is This The Future?

Things aren't getting better when it comes to growing the number of accounts on competitive supply in Pennsylvania.

The state recently celebrated 2 million switched accounts, with the growth, aside from about 5% of the total reflecting existing shoppers at Duquesne Light, coming entirely over the past three years.

However, at the current rate of weekly migration, it would take over seven years for Pennsylvania to see another 2 million customers shop (Pennsylvania has over 5 million electric distribution accounts).

Though there have been some marginal gains in the shopping growth rate since the historic lows which opened February, weekly migration remains challenged according to the February 20 migration report from the PUC.

Link to 2/20/13 Weekly Migration Report

Matters has also developed a comparison of the migration levels from the 2/13/13 Report to the 2/20/13 Report.

Link to Matters' Comparison of Weekly Migration

The aggregate increase in residential customers on competitive supply from about February 14 to about February 20 (reporting date varies slightly by utility) was 4,800 accounts on a statewide basis. This is marginally higher than the week-ago growth rate of 4,000 accounts, and better than the dreadful growth rate of less than 3,000 accounts seen two weeks ago.

Still, Pennsylvania was a market seeing growth of 6,000 migrated customers per week in much of January, and aggregate growth levels of 7,000-10,000 migrated customers per week in November and October of last year.

Once is a blip, twice is a coincidence, but three consecutive weeks of challenged migration growth suggest that serious structural problems in the state's retail market exist, and that migration has reached a saturation point under the current utility-as-default-provider market design -- particularly as retail suppliers continue to make economic offers to customers (savings of ~12% at PPL, ~15% at PECO, nearly 40% at Duquesne Light, and that's not even using the absolute cheapest competitive offer).

Indeed, the disturbing migration numbers constitute new evidence which could (or should) justify an immediate reconsideration or re-opening of the PUC's end-state retail market design order. For the entire time that the PUC was considering the end-state market design, evidence was showing rapid migration to competitive supply (and though some utilities occasionally saw a transient weekly decline in shopping, they were outliers, and typically such weekly losses were not a sustained trend and were recovered when viewed over a longer term), supporting the PUC's view that only minor tweaks to the retail market design were needed.

Facts have changed.

Specifically, the weekly net growth in residential shoppers at each utility from about February 14 to about February 20 was as follows:

Duquesne Light         835
Met-Ed                 620
PECO                   800
Penelec                782
Penn Power             155
PPL                    933
West Penn Power        662

For some utilities, this week's growth represents marginal improvement, but for others (Duquesne Light, PECO), it represents a decline. For comparison, although weekly growth can vary week-to-week, most of the major EDCs, aside from Penn Power, had recently been seeing residential shopping growth at or near 1,000 accounts per week.

This weak growth comes in a market with sufficient headroom (based on pricing of supplier offerings), and favorable purchase of receivables programs. This suggests moving to quarterly full requirements auctions (if the legislature even acquiesces to such a design) isn't going to fix the problem, which is customers not engaging in the market despite significant savings.

Rather, it suggests that having the utility, a well-known and trusted name, passing-through default supply to customers (although the utility administratively procures the supply, it is not something controlled by the utility, as the design is set by the PUC and pricing is set by PUC-designed procurements) remains a structural barrier to competition, even though other than slapping its name on the PUC-determined default service, the utility has no role in the provision of it.

In other words, customers are not sticking with the utility for supply because there is some actual value provided by utility-offered default service (since any party could perform the same function, and the value, if any, comes from PUC's design of the service, e.g. hedging, volatility reduction, etc., not which entity executes the PUC's design), but because of misperceived value -- the customer is loyal to the utility, the customer is comfortable with the utility and just doesn't want to change, or the customer is unaware of alternatives.

This doesn't mean customers have to be kicked off of default service, bur rather, if the default provider is merely executing on plans strictly set by the PUC, and passing through whatever supply the PUC approves, why should default service be a utility brand, rather provided by another PUC-approved party (or even the utility) under "Brand X," since, in reality, that is what default service is.