Competitive natural-gas suppliers have finally entered the Philadelphia residential market, though they haven't exactly triggered a stampede of customers away from the municipal gas utility.

Going into the fall heating season, two suppliers are extending offers to residential customers of the Philadelphia Gas Works, according to the Pennsylvania Public Utility Commission's website, pagasswitch.com.  PGW says 10 suppliers are signed up to serve residential and small-business customers. Last year, there were zero.

But only 662 PGW residential customers had switched to alternative suppliers as of Oct. 1, according to the state Office of Consumer Advocate. That's about 0.1 percent of the customers, compared with a statewide average of 11.9 percent. In the Philadelphia suburbs, about 71,000 Peco Energy gas customers have switched suppliers.

The number of residential gas customers who have switched suppliers has remained steady, at about 11 percent to 13 percent in recent years.
Pennsylvania Office of Consumer Advocate
The number of residential gas customers who have switched suppliers has remained steady, at about 11 percent to 13 percent in recent years.

PGW's territory is one of the last Pennsylvania frontiers for competitive gas suppliers, who have kept clear of the city because the high customer-default rate cuts into profits. PGW removed some administrative and billing obstacles for suppliers to participate, however, and last year stepped up a campaign to educate customers about choosing suppliers.

Customers who decide not to shop continue to get their gas supplied by the utility at a rate regulated by the PUC. Utilities like PGW do not make a profit from gas-supply charges, which vary quarterly, according to market conditions.

The PUC’s website shows there are two competitive offers available for PGW customers.
PaGasSwitch.com
The PUC’s website shows there are two competitive offers available for PGW customers.

The two competitive suppliers publicly marketing in the city through the PUC gas-shopping website are NRG Home, the retail supply subsidiary of NRG Energy, and regional supplier BlueRock Energy Inc.

NRG, whose eastern retail headquarters is based in Philadelphia, entered the PGW market last November as a way to sell gas to customers it already provides with electricity. "We see great promise in offering natural gas to our existing customers, as well as prospective customers," said Mike Starck, the general manager of NRG's retail east division.

The company's variable-rate offer starts at 47 cents per 100 cubic feet (ccf), about 7 percent more than PGW's current price of 43.89 cents. Despite the higher price, NRG appeals to customers with cash-back loyalty programs, frequent-flier reward programs, and associations with charities such as Philabundance and Children's Hospital of Philadelphia.

BlueRock Energy, based in Syracuse, N.Y., entered the PGW residential market several months ago and offers a rate of 43 cents per ccf, a fraction below PGW's standard price. BlueRock's rate is fixed for 12 months, so it provides some price stability for customers.

BlueRock's sales strategy in the residential market is primarily through advertisements on radio, including digital radio like Pandora, said Philip R. VanHorne, the BlueRock chief executive. The company specifically does not use door-to-door salespeople or telemarketing, the methods that have generated the most customer complaints against other energy suppliers.

"I don't like it when people knock on my door, and I don't like telemarketing, so I won't inflict that on someone else," said VanHorne.

Though there are only two PGW suppliers marketing through the PUC's website, compared with more than 30 that have offers posted for Peco's suburban gas customers, PGW expects the opportunities for city shoppers to expand in the near future.

Four suppliers are enrolled in a program in which PGW includes the gas suppliers' charge on its monthly bills, including NRG and BlueRock. Six other suppliers are set to enroll residential customers but will bill them separately for their gas supply, which means they assume the risk if the customers fail to pay.

"Other suppliers will be testing in PGW's electronic data interchange in the coming months, and it looks like at least some of those will market to residential customers in the near future," said Barry O'Sullivan, the utility's spokesman.