Dive Brief:
- FirstEnergy Solutions has sent letters to an undisclosed number of Pennsylvania customers in Peco Energy's territory, informing them their contracts will not be renewed when they expire in October, Philly.com reports.
- The competitive provider said that it’s not exiting the retail supply business, but wanted to manage its exposure and balance its portfolio.
Dive Insight:
The FirstEnergy Corp. subsidiary launched an expansion in Pennsylvania about three years ago, offering fixed-rate contracts that undercut Peco Energy's standard offer. But the company says it is looking to reduce its exposure to volatile power markets, after it took losses during the 2013-2014 winter when demand for expensive power spiked.
"We didn't have all that risk built into the pricing," said a FirstEnergy spokeswoman. "We actually had to go out and buy power for those customers."
FirstEnergy Solutions recently mailed out letters to a swath of customers saying the utility won't renew the contracts when they expire in October. Those customers will then default to Peco's current billing rate if they don't find another supplier. Peco's billing rate is costlier than what the customers currently pay.
Todd A. Shipman, a utilities analyst for Standard & Poor's Ratings Services told Philly.com that a few days of such volatility can cost a utility as much as years’ worth of profits.
Furthermore, Shipman added that the low price of natural gas depressed power prices enough to deter several large retail electricity providers from the business. "A number of energy companies are concerned we're in an extended period of low prices in the electricity industry, and it's time to get back to basics," Shipman said.
FirstEnergy Solutions served more than 2.5 million customers in 2013, but today that number sits around 1.9 million. But despite the trend, FirstEnergy has indicated it does not intend to exit the business and will continue to honor its long-term contracts.
The company controls more than 13,000 MW of capacity.
