City touts Philly Buying Power to fill small-business electric needs

A discount electric marketer that is focusing on Peco Energy Co.'s small-business customers will get a big boost today with an endorsement from the Philadelphia Commerce Department.

The Nutter administration is throwing its weight behind Philly Buying Power, a program that is attracting small businesses to negotiate group discounts when Peco's rates are restructured Jan. 1.

"The bigger the buying pool, the more power it has to command better prices," said Kevin Dow, the Commerce Department's chief operating officer.

The plan is modeled on Boston Buying Power, a two-year-old program that has picked up 5,000 small-business accounts, said Scott Stiner, the chief executive of Taylor Consulting & Contracting, a Luzerne County firm that devised the Boston and Philadelphia buying programs.

"We're looking at achieving 10 to 20 percent off Peco's 2011 rates," Stiner said.

Stiner said the Philadelphia-area program has already signed up about 250 customers and is holding its first auction next week to obtain prices from power suppliers.

"We thought this was a good opportunity, and we took it right away," said Jim Flood, manager of Oteri's Italian Bakery in Olney, one of the program's early adopters.

Philly Buying Power is the latest opportunity in the dizzying array of choices that electric customers will face as market rates take hold.

Scores of power suppliers are jockeying for Peco's 1.6 million customers, some focusing on large commercial and industrial customers. The battle for residential markets is expected to pick up in November.

But city officials say that few suppliers are fashioning deals for small commercial operations such as restaurants, dry cleaners and corner grocers.

The Commerce Department endorsed Philly Buying Power after issuing a request for proposals. The city is not involved in the transaction between electric customers and the power broker, but is encouraging small businesses to consider the choice as a way to reduce operating costs.

"We're not creating any kind of additional layer," said Jon Edelstein, the city's director of sustainable development. "We're not adding a cost to the taxpayers. We're providing a service."

Like all brokers, Taylor collects a fraction of a cent on each kilowatt hour sold to its clients, which is included in the price it quotes.

The market restructuring was put in motion by the state's Electric Choice Act, whose aim was to stimulate competition to drive down energy costs.

Under the law, customers are free to shop around for a power generator, whose charges account for the largest part of the monthly electric bill. Peco remains the regulated electric distribution company that makes its profit off a fee charged to each customer.

Customers are under no obligation to switch suppliers. The Pennsylvania Public Utility Commission requires Peco to supply power to customers who stay with the utility at a market-based default rate - the "price to compare."

Since Peco announced its default rates Oct. 15, several suppliers have said they will offer discounts. Peco says the overall charge for residential customers who stay with the utility will go up about 5 percent Jan. 1.

For small commercial customers who do nothing, Peco's overall rate will go down on New Year's Day, the utility says. But Peco's rate will adjust every three months to reflect market conditions, and power marketers are already offering fixed rates that will give customers more price stability.

Philly Buying Power says its model is to aggregate an ever-expanding client base to leverage its buying power. It is selling the service to any small-business customer in Peco territory, not just those with city addresses.

Eventually, as more customers sign up, the program will group customers with similar patterns of electric usage, which should make them more attractive to suppliers.

"An individual pizza place might not have the same purchasing power as 10 pizza shops, so by combining them, by putting like energy needs together, they can go to the market as a group, and get a lower price as a result," Dow said.