Utility to Stop Offering Electricity to Customers in Harrisburg, Pa., Area

David DeKok , The Patriot-News, Harrisburg, Pa. - Knight Ridder/Tribune Business News ( February 26, 2002 )

NewPower Holdings Inc., which is 40 percent owned by Enron Corp., is being acquired by British energy company Centrica and terminating an agreement to supply electricity to 192,000 residential customers of Philadelphia-based PECO Energy. The PECO agreement is often touted by state regulators as one example of the success of Pennsylvania's 3-year-old electric competition program. PECO spokesman Michael Wood said NewPower's contract with PECO was for three years, meaning it had more than a year to run. He said there is an escape clause in the contract, and the customers would come back to PECO in 90 days. However, the customers lose a 2 percent discount unless they find another supplier.

NewPower, based in Purchase, N.Y., obtained the customers in the fall of 2000 in a deal with PECO to take over its provider-of-last-resort service -- providing electricity at 2 percent less than PECO to customers who did not find alternate suppliers on their own. PECO had planned to give NewPower all those customers.

But Green Mountain Energy, a renewable power supplier, complained to the state Public Utility Commission that it had offered a better deal, and ended up with 50,000 of the provider-of-last resort customers. The PUC periodically points to the settlement as one of the electric choice success stories.

"Our primary concern will be the customers," said PUC spokesman Tom Charles. "We will work with PECO and NewPower to make sure customers receive power. We have no reliability concerns." Green Mountain spokesman John Holtz said his company continues to serve the 50,000 customers it got from PECO and another 50,000 statewide it signed up on its own. He would not say specifically whether Green Mountain planned to go after the customers NewPower was giving back, and said new terms might need to be negotiated. NewPower said it was giving back the customers because "the prospective profitability of these customers is limited, given the necessity of load-serving entities such as NewPower to purchase installed capacity." Installed capacity can best be understood as guaranteed access to a supply of electricity, not the electricity itself. It is a requirement of the PJM Interconnection, the regional power pool administrator, but not of other regional power pools. Electricity marketers such as NewPower have complained about the PJM requirement since the beginning of electric competition in 1999. "Reliability is paramount, and we have the installed capacity requirement to assure that," said Beth Foley, a spokeswoman for PJM.