Utility Management Group

Com Ed's Pending Rate Decrease

After May, 2010, many customers were surprised to see a noticeable increase to Com Ed's Capacity Charge, one of their largest charges. The good news is that as of May, 2011, that charge is scheduled to drop approximately 40%. In May, 2012 it's scheduled to drop approximately 91% compared to today's rate, and will rise slightly in May, 2013.

As many customers are reviewing options for the next 1 to 3 years, it's important to understand a few facts regarding this decrease.

• When comparing offers, be careful of suppliers who  include Com Ed charges in their analysis and compare today's Com Ed charges, including the higher Capacity Charge, to future Com Ed charges. This tends to inflate the projected savings. Focus on negotiating the cost of your electricity, which suppliers can control.
• The only issue you need to address regarding Com Ed's charges is whether they will be billed without a markup. If the charges are fixed as opposed to being billed on a pass through basis, it's likely that the charge is being inflated.
• Consider the offer in it's entirety. If the energy rate being offered is low enough that it more than offsets the increase in Com Ed's charges, we'd recommend considering the offer. Only do so if the supplier is willing to itemize the charges, so you can see what you are being charged for all applicable rates.
• Be wary of suppliers who offer to lock Com Ed's charges, claiming it provides budget certainty. Under no circumstances will they lock the rates at a cost lower than Com Ed's charges. They will either reserve the right to pass any increases on to you (look for a clause in the agreement titled "Material Change in Law"), or will increase those charges substantially so no matter what type of increases Com Ed has, they won't lose money. Locking Com Ed's rates under these circumstances will only guarantee that you pay more than necessary for those charges.
• When considering energy only offers, make sure the proposed rate includes Energy, RPS and Congestion charges. Some suppliers now leave out the RPS, or Renewable Energy charge, making their offer look more attractive.
• Finally, if conflicting information is making the offers confusing, keep it simple. At the risk of being repetitive, the only cost you can negotiate is your energy charge. Focus on that, make sure all other charges are being billed with no markup and you should be assured a fair rate.

Index Versus Fixed Rates

Electric customers have the option of locking rates or being on an index rate. Unfortunately, given the volatility of the market, there is no way to know which program is going to result in lower costs. If you're shopping for an index program, please request the following:

• Definition of what index your supplier will use. Most  suppliers use PJM's day ahead index. We recommend avoiding suppliers who will not define this index.
• Definition of the supplier's margin. A "simple" contract may appear to be attractive, but you want your supplier to define what type of mark up they are going to charge you.
• The option to lock rates. The electric market tends to be cyclical. Index rates are attractive when the market is low, but you don't want to be on this program when the market moves up.
• Trigger prices. Your supplier should proactively watch the market for two opportunities. The first is a drop in the market, where locking rates is  attractive.The second is upward movement in the market. You want the option to lock rates before the market moves up, not after you receive an exceptionally high invoice.