Why has the price of electricity come down in Pennsylvania compared to the monopoly providers?

by jsgs45 on November 4, 2010

Electricity Service in Pennsylvania

PA Electric Deregulation

In Pennsylvania you have two different schools of thought. Some believe that deregulation causes electricity prices to go up as private corporations conspire to screw the general public.

Many times this type of thinking is liberal political positioning and story telling to keep a large public economic sector in the complete control of the government.

The more large parts of the states economy politicians have the more power they have.

So does electricity deregulation in PA really cause electric rates to go up in price?

The answer is no. In a free market society as in Pennsylvania  in which you have over 30 retail electricity providers who have set up shop to try and make a profit you will see prices drop.

What happens in any competitive market is efficiencies created and a lowering of profit margins as more competitors try to out bid the other guy.

Pennsylvania electric companies are no different in competitive markets as it is in the medical, health care, restaurant, and technology industries.

More competitors, create fiercer competition and as a result better efficient ways of doing things with the end result a lower price for the consumer.

So the reason you saw competitors come into Pennsylvania and offer cheaper electric prices compared to the large monopoly companies simply has to do with this free market concept.

When Pennsylvania got rid of the rate caps those monopoly companies had to raise their prices in order to maintain a profit because the rate caps kept their profits too low for too long.

The new PA electric providers who came into the state didn’t have to contend with rate caps and could start fresh with new low prices.

The monopolies had to deal with fixing their pricing structure after dealing with artificial government measures to freeze prices.

Now energy consumers in PA are paying less for their electricity but prices can still move up and down in prices based on commodity prices.

You see whether electricity utilities are regulated or deregulated you still must deal with price fluctuations based on the fuel used to create your electricity.

Electricity is not the most efficient energy. PA power plants create your electric power using hydro, natural gas, coal fired power plants, nuclear, wind power, and other sources of power generation.

Usually large turbines are turned when coal or natural gas create steam to start moving these things. That friction and movement creates electricity which is then sent over power lines.

Congestion and line losses cause more inefficiencies as that power reaches your house or commercial business in PA.

If natural gas or coal fuel goes up in price this will cause your PA electricity prices to also go up in price.

In the case of fuel commodity spikes you cannot blame greedy corporations but instead there is simply more demand for these fuel types.

People are usually heating their homes more than usual in the winter or cooling more than usual in the summer.

Hopefully this explains why deregulation lowers the price of your Pennsylvania electricity rates over time.

The government can lower your prices too but only if they employ a redistribution of wealth socialistic type of system where income tax dollars are being moved into paying for low income families electric bills.

That idea sounds charitable but then when do we draw the line and say no to subsidizing low income families. Do we also pay for everyones cable television, homes, garbage disposal, etc?

We quickly decline into something unlike our free America and more like Russia.

If you would like to compare Pennsylvania electricity rates from multiple electric providers competing in your area please use our zip code tool found at the top of this page.

Once you have entered in your zipcode in Pennsylvania just click on “Compare”

You can research, compare prices, and order electric service in PA all online or call an energy consultant at 1-800-971-4020

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