What are Rate Caps Anyway?

Rate Caps 101

A ‘rate cap’ is an artificial cap set on the price of electricity. Rate Caps in Pennsylvania were set by the Electricity Generation Choice and Competition Act in 1997 to ease the transition to competitive markets. Rate caps across the state of Pennsylvania have been expiring for several years and will be completely eliminated by 2010. Currently, five utilities continue to supply energy at capped rates – PP&L, Allegheny Power, PECO, Penelec and Met-Ed.

As a result, Pennsylvanian’s have been paying artificially low prices for years. However, the problem with rate caps is that they are not reflective of the true market price of electricity and thus do not encourage energy conservation or efficiency.

The removal of the remaining rate caps will benefit energy customers across the Commonwealth due to the resulting increased electric competition and product offerings. Electricity rates or true market pricing will then be determined by natural market forces – supply and demand.

Direct Energy Business offers fixed-rate contracts for commercial and industrial customers which are designed to protect against fluctuating market prices. Direct Energy Business advocates and supports market rules that support energy supply choice and competitive offerings.

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