February 2011 Newsletter

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Ideal Buying Windows for Electricity

Now that the rate caps have come off in the PECO, MetEd, Penelec and Allegheny utility areas, the whole of Pennsylvania has deregulated, following in the footsteps of the entire Northeastern
US.

Most commercial, industrial, government and non-profit entities have now switched to a new electricity supplier, or have decided to stay with PECO on its 'default' rate. Many such users are probably not planning to think about their electricity contracts for another year or more, but it could pay handsomely to think about your renewal strategy now.

There are several issues to consider:

2 Buying 'Windows': Each year, there are two 'windows' of opportunity for buying atadvantageous rates - Early Spring and Fall. See below for the best time to act.
PECO's 'Default' Rate: If you are on PECO's 'default' rate, be aware that it is not a fixedrate. PECO has the right to make quarterly 'adjustments' to their default rate, based on market conditions. If the market begins to rise, you should take action quickly.
PECO Rate Increase: PECO applied to the Pennsylvania Utility Council for a 7% 'distribution' rate increase (i.e. local delivery) in late 2010 and was granted a 4.9% increase, which came into effect on 1/1/11. You will see it on your first bill for 2011.
New PPL Rate Increase: Similarly, PPL applied for a 5.8% increase and was granted a 4% increase.'Default' rates for all local utility areas can be found elsewhere in this newsletter. 2 'Windows of Opportunity'. In the past 7 years there have been buying opportunities in the early Spring and Fall in every year except two. The 2 exceptions can clearly be seen on the historical electricity pricing chart shown below:
The 1st peak in 2005/6 was caused by Hurricanes Katrina and Rita hitting the Gulf coast in quick succession, which upset the market for about a year.
2nd peak in 2008/9 was caused by world oil prices rising to $147/barrel and the financial speculation that went with it, until the bubble burst, prices collapsed and the recession began.

Other than these market aberrations Spring has consistently been a good buying time as the days get longer (people spend less time indoors) but before the Summer air-conditioning load begins. Fall is also a good buying time before the Winter heating season starts.
For many customers with calendar-year supply contracts, they could renew their contracts in September each year, but there's a significant risk in leaving it until 3 months before the deadline.

If something happens to boost the global price of oil at that time, the Fall buying opportunity may disappear and then there isn't enough time to recover before the contract runs out. For this reason, it's a much better plan to renew your contract in the Spring. If the Spring window
is affected by global events, there's still 9 months for the market to recover before the contractmust be renewed.

It pays to monitor electricity prices on an ongoing basis - not daily perhaps - but on a weekly basis. Our newsletter will provide updated graphs each month in any case, but if you'd like to keep up with market conditions more frequently, please email us to request weekly information.

February 2011 Newsletter

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