PPL Electric Utilities, based in Allentown, serves 1.4 million customers in Pennsylvania. PPL says its rates will jump 30% in January. That increase is actually somewhat of a break for consumers considering the fact that earlier speculation pegged the company’s hike as high as 60%. Met Ed’s rate caps expire on January 1, 2011. Both companies serve south-central Pennsylvania. They own the wires that transmit electricity to your home or business. As rate caps come off, consumers and businesses have electric choice meaning you can choose the company that supplies your electricity. PPL and Met Ed will continue to provide the transmission and distribution functions even if you switch suppliers. If you don't choose a different supplier, your current electric company will be the default provider. And, in many cases, you will receive just one electric bill per month.
Doug Krall, manager of regulatory strategy for PPL Electric Utilities will be a guest on the program. Joining him is Richard Hudson, PA chairman of the Retail Energy Supply Association and director of regulatory and legislative affairs for ConEdison Solutions. ConEdison plans to enter the midstate market, supplying electricity to commercial and industrial customers. Consumer advocates had fought to extend the rate caps but lost that battle. Now, they strive to educate customers about money-saving opportunities and conservation programs. Sonny Popowsky, Pennsylvania’s consumer advocate, will join us with tips on managing your finances and working the best rate in the competitive market. Check out the Office of Consumer Advocate’s guide to buying electricity for more insights.
“Over the next decade, the way we generate, distribute and consume energy in Pennsylvania is going to change dramatically,” Pennsylvania Public Utility commissioner Robert Powelson recently explained to the Harrisburg Patriot-News. Pennsylvania deregulated its electric market in 1996 with the goal of lowering electricity costs and stabilizing supply. It hasn’t exactly worked out as planned. Lawmakers and then-Governor Tom Ridge capped how much utilities could charge for electricity but also allowed them to collect “stranded costs” for overrun expenses they incurred at nuclear plants they had built. Those stranded costs appear as a transition charge on your monthly electric bill but they will disappear in January.
The rate cap in 1997 was set too low for many energy providers to compete with the “biggies” already established in Pennsylvania so competitors abandoned the market to the monopoly players like PPL, Met Ed and PECO. For the last 12 years, those utility companies have operated under rate caps that did not reflect the rising cost of energy. That fact is small comfort to ratepayers who now will have to fork over more each month -- estimated $30 more for the average residential customer using 1,000-2,000 kilowatts per month. PUC chairman Jim Cawley told Radio Smart Talk listeners earlier this week, “We estimate that customers have saved $7 billion in the last 12 years in Pennsylvania. If this had not happened, the electric utilities would have been into the PUC asking for rate increases over the last dozen years. The PUC would have given them something in order to keep pace with increased generation costs. That didn’t happen would you rather have kept the money in your pocket and just paid more of the true cost going forward or would you rather have paid incrementally more money all of these years and not have the money? I think the answer is pretty clear.”
David Hughes, executive director of Citizen Power in Pittsburgh, takes a dim view of Cawley's argument. He counters in an emailed dissent, "...rates were trending down when deregulation started and very well have continued downward, due to a variety of things, including plant depreciation schedules. But any savings achieved has not been the result of competition. It has been the result of regulated rates that have been in place since 1999. Deregulation proponents claim that electric monopolies are gone. The fact is they are still in place, and in some cases, even bigger. They own practically all the generation capacity and all the transmission capacity. Imagine trying to compete in that arrangement. So, once the caps (another myth since rates have been creeping up since 1999) come off, these monopolies will legally be allowed to charge whatever the market will allow. The state has given up its authority to ensure that generation prices are just and reasonable ... due to the huge cost and lead times to build generation and transmission capacity, a utility has to have a huge customer base to earn a return on their investment. Very few players are in a position to enter such a market and those that have tried in the last ten years have left. This is why we had the regulatory paradigm set up in the first place."
Eric Epstein, coordinator of RocktheCapital.org and chairman of Three Mile Island Alert, takes state government and the utilities to task for failing to deliver on the promises of lower electric rates, greater capacity and more jobs through deregulation. He writes in a recent op-ed piece, “A study published by Carnegie Mellon University's Electricity Industry Center found, ‘On average, power users in restructured states pay 2 to 3 cents per kilowatt hour more than customers in states that didn't restructure.’ (Electricity Prices and Costs Under Regulation and Restructuring, 2008) By contrast, the (Pennsylvania) Department of Revenue released a report in August 2000 - "Electricity Generation Customer Choice and Competition" - that guaranteed free market nirvana: ‘The real gross state product will be $1.9 billion higher; overall employment will increase by 36,400 full-time and part-time jobs, nominal personal income will increase by $1.4 billion; the price index will decrease by .47 percent; and the population will increase by 51,400 people, as workers are attracted to job opportunities in Pennsylvania.’ Decide for yourself if electric deregulation has delivered on its bold promises or served as yet another corporate failout.”
The most important piece of information you need to shop for energy is the price to compare. PPL’s 2010 price to compare for residential customers is 10.5 cents per kilowatt hour. Competitors are coming to PA and one of the first is Dominion Energy Solutions of Richmond, Virginia. Dominion promises to beat PPL’s price by 10 percent for the first 25,000 customers who make the switchover. The company’s 2008-2009 corporate responsibility report notes that, “Dominion's strategy is to be a leading provider of electricity, natural gas and related services to customers in the energy-intensive Midwest, Mid-Atlantic and Northeast regions of the U.S., a potential market of 50 million homes and businesses where 40 percent of the nation's energy is consumed.” Dominion consultant Jim Crist also will appear on the Smart Talk panel.
FirstEnergy Solutions of Akron, Ohio is an unregulated subsidiary of FirstEnergy Corp and also could enter the market here in early 2010. FirstEnergy Corps’ electric companies include MetEd, Penelec, and Penn Power.
All suppliers much be licensed by the PUC. Businesses will have a range of supplier options. No fully green energy suppliers are in the Pennsylvania market, yet. You should check with your energy company to determine whether you will be charged a transition fee to switch. The PUC and the utility companies have launched major public relations campaigns to inform consumers about their power choices. WITF offers a great site, as well.
Jim Cawley, again on Radio Smart Talk, opined this week, "There’s no good time to bridge the gap between capped rates and market prices but if you’re going to do it, we are actually fortunate that the economy has driven down the cost of generating electricity and, therefore, the gap that has to be bridged is at an all-time low. That’s why the increases are --quote -- "only" going to be 30 percent in your overall bill if you don’t shop. And at the same time the legislature is requiring the utilities to drive down usage which helps you save money. And it drives down demand on the (PJM - Pennsylvania/New Jersey/Maryland) grid which lowers wholesale prices which are passed through dollar for dollar.” He adds, "People can handle this and they are foolish if they don’t take advantage of the 10 or 15% discount combined with energy efficiency and conservation efforts."
It is an ideal time to consider alternative energy and conservation practices and there are many incentive programs and tax credits to accomplish those goals. In fact, the General Assembly last year passed a new law -- Act 129 -- that requires the utility companies to reduce overall demand for electricity by 3 percent and shave peak use by 4.5 percent by 2013 or face penalties. You know it’s a brand new day when the power companies push you to use less electricity! I can see my Dad smiling up there.
Thirteen years after the passage of electricity deregulation will Pennsylvania consumers finally see the benefits of a free-market energy system? The onus is on each of us as a consumer to become educated about the choices we have, the costs we must bear, and our outlook for energy usage. Be sure to join us Friday at 8:30 p.m. for Smart Talk about energy on WITF-TV. And feel free to share your thoughts on electric choice with us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
