Sherri_Ly's Blog

I was shocked a few months ago when I looked at my Pepco bill.  It was more than $200 and it hadn't exactly been a cold winter.  So my husband and I went back and looked at our bill from five years ago.  We used the exact same amount of kilowatt hours and the bill was almost twice as much.  I hadn't realized until then how much electricity costs had gone up.  In fact Pepco has increased rates about 80% since 2004.  There's been a lot of focus on BGE, which saw a 72% jump last year all at once, but Pepco customers are feeling the pain just as much.

So I wanted to know what's going on. We got the help of an energy consultant and started looking at the numbers. Let me tell you trying to find a price for electricity from the Public Service Commission is ridiculous. You can search the state website a hundred different ways and never find the rates.  De-regulation was supposed to make things cheaper but it hasn't.  Yes, the price of coal, natural gas and nuclear fuel to power plants has gone up but it hasn't gone up as much as the electricity rates we pay.  So that doesn't explain it all. 

Under de-regulation the utilities had to sell their power plants, which was supposed to create more competition.  BGE sold to a sister company.  So now the same parent company, Constellation Energy, still owns both BGE and the power plants.  Who is profiting in all this?  The companies that own the power plants.  The utlities buy power through an auction process now and the power generators or sometimes they're just energy traders bid to provide the electricity.  The price at auction it turns out is higher than the market price.  That auction price includes all kinds of mark-ups that add millions of dollars to the cost.  Here's one I was astounded by.  It's called congestion pricing.  On a very hot or cold day when demand is high the power companies often have to fire up less efficient plants that cost more to run.  They're called peaker plants because they're needed to meet peak demand.  Before de-regulation plants charged what it cost to generate the electricity.  Today the price for electricity on a given day is the price to produce electricity at the most expensive plants.  So even if a plant produces electricity much cheaper, it gets the highest price. 

Here's the thing most people don't understand.  It's not Pepco or BGE that's making the money.  They are still regulated and their profit margin is determined by the state.  The power plants are not regulated.  They can charge whatever they want for electricity.  At one auction, all the bids came in over the limit set for the state to protect customers from excessive prices.  What happened?  They didn't lower the bids.  Instead the state raised it's limit.  Hmmm.  Of course that was under a different adminstration.  The power companies say the formula used by the state to set the limit didn't take certain factors into consideration.  Still it does make you wonder.

Regulated states still pay much less than those of us in the "free maket" system of electricity.  If we could turn back the clock I think most people would do it.  But we can't just take the power plants back. 

One last thought--- while all of our bills are going up deregulation has done wonders for companies like Constellation which owns most of Maryland's power plants.  In 2006 it made nearly a billion dollars in profits and in 2007 it was more than $800 million.  Not too shabby for them.

So what do you think?  Should the state re-regulate the electricity markets?  Can you afford to keep paying more?  I'm conserving as much as possible, but I sure can't cut back by 80% to get my bill back to where it was a few years ago.