Price to Compare Formula Changing in Maryland
July 6, 2010
The State of Maryland's Public Service Commission (PSC) has finally ordered utility customers to change the way they compute their "Price to Compare" (sometimes called "Cost to Compare") figure they use on their bills.
The idea behind Price to Compare was to make it easy for consumers to come up with one simple figure to compare the rate charged by their utility for electricity to what alternative suppliers (like the one we sell to our residential customers) charge, rate-wise. You can see the Price to Compare on your monthly bill, usually in the same area as your usage statistics, but the location varies among utilities.
In theory, you are supposed to have one simple number, to conduct an apples-to-apples comparison. In reality, as our friend Jay Hancock of the Baltimore Sun says:
Yet the (Price to Compare number) was often months old, and confusingly blended seasonal costs into an annual mishmash.
That's being polite. The Gazette said:
The (PSC) found that the "price to compare" — which it ordered utilities to post on customers' bills seven years ago so that consumers could examine supply costs — does not provide enough useful pricing information to consumers and could mislead them.
How so? Well, here's what Pepco's Web site said about how Price to Compare is computed:
The Price to Compare is calculated by taking the total kilowatt-hour usage for all customers within a specific rate class for a 12-month period and multiplying that amount by the actual generation and transmission rates. This total amount is then divided by the total 12-month kilowatt-hour usage which provides an average per kilowatt-hour rate for generation and transmission for the rate class, which is the Price to Compare.
Congratulations if you are still awake. Going forward, though, here's how Price to Compare will work (from The Gazette):
The PSC ordered utilities to replace that single comparison point — both on bills and their company Websites — with detailed prices for their standard-offer service, including their current charge per kilowatt-hour and the end date for that price; the charge per kilowatt-hour thereafter and its end date; and a notice that the price beyond that date has not been set. The end dates were required because prices change with contracts, which are bid twice annually, and typically are higher in the summer.
Utilities also were ordered to post a weighted average price for their standard offer service as well as the date through which that average applies.
This does mean more information, and a bit more of a challenge for the utilities (and companies like ours) to explain rates and billing more completely. But it's either that or rely on a system that could provide misleading information.
I know that in my own dealings with customers, I don't even rely on the Price to Compare anymore. I just use their current rates compared to our rate offerings (which still beat the utilities, by the way). The new system will be much closer to that, which is good for the customer.
Utility Choice is a concept that's still pretty new to Maryland residential utility account holders, and there's still a lot of questions about how it works. The Price to Compare figure did them no favors, and only added confusion to the mix, making our jobs harder. This latest action by the PSC should help consumers make a more-informed decision about their rates.
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