Constellation Electric Offer

A number of people in Pepco’s service territory have asked about Constellation Electric’s (Constellation) fixed price electricity offer.

In the commercial world, most customers view the likelihood that energy prices will go up as much greater than the likelihood that energy prices will fall further.  I think this makes sense.  Energy prices are currently low, unfortunately, because of the weak economy.  As the economy recovers, demand for electricity and natural gas will likely rise.  Commercial customers are currently locking in electricity and natural gas prices for two, three and even five years.

Constellation is offering to supply electricity to residential customers for one year at 9.65 cents per kilowatt-hour (kWh) and for two years at 9.55 cents per kWh. On their promotional offer, they note that their prices are 13% (for one year) and 14% (for two years) lower than Pepco’s current rate. Is this a good deal? Here are a few things to consider.

For most residential customers (Schedule “R”), Pepco’s current generation rate is 11.842 cents per kWh and its transmission rate is 0.348 cents per kWh, bringing the total G&T rate (excluding taxes) to 12.19 cents per kWh.  These generation and transmission rates are in effect from 6/1/10 to 9/30/10.

On its website, Pepco has posted its generation rate for the upcoming period of 10/1/10 to 5/31/11.  This rate is 9.885 cents.  Assuming the transmission rate during this eight month period remains the same as the current transmission rate, the total G&T rate (excluding taxes) will be 10.23 cents per kWh.  Based on this alone, Constellation’s offer of 9.65 cents per kWh seems attractive.  However, Constellation’s rate is only 5.7% lower than the forward Pepco rate that runs through 5/31/11. Beyond 5/31/11, any discount or premium to Pepco’s rate cannot be determined as Pepco’s rates have not been defined and won’t be defined until sometime in the future.

Read the “Renewal” paragraph in Constellation’s Terms and Conditions section.  It says, “This Contract shall be automatically renewed with the revised terms and conditions (including any updated pricing) unless you cancel the renewal by notifying Constellation Electric in writing within 15 days after receiving notice of the new prices and/or terms and conditions.”  This is a very short window.

In the “Term” paragraph, it says that the contract will automatically renew for an additional 12-month renewal term unless terminated. So, if you miss the window, or you don’t terminate the contract and pay a $150 penalty, you will be with Constellation for another 12 months at a rate they will define in the future.

If you are interested in locking in a fixed rate, there are other suppliers making offers. In addition to comparing their prices, be sure you read and understand their terms and conditions. You can find alternative suppliers on the Public Service Commission’s website.