By KATHY MELLOTT
The Tribune-Democrat
June 28, 2009 11:45 pm
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Reduced demand for energy could translate into good news for electricity customers, as rate caps are set to expire at the end of next year for most Pennsylvania power companies.
Earlier estimates had residential power customers seeing electricity bills jumping by 60 or 70 percent when state-imposed caps expire at the end of 2010.
Penelec officials are not making any predictions on how much more customers will be paying once the industry is deregulated, a company spokesman said.
“We don’t know, and we’re not going to estimate what the rates will be when the caps end,” said Ron Morano, a spokesman for FirstEnergy Corp., Penelec’s Ohio-based parent company.
Penelec supplies energy to thousands of residential and commercial customers in Cambria and Somerset counties.
Recently, wholesale power purchases by some other utility companies including Allegheny Power, came in lower than anticipated.
Those new figures sparked optimism that the likely rate hikes, at least initially, could be held to 10 percent following deregulation.
But utility companies are keeping an eye on the increasing price of gasoline, the worldwide economy and what could happen during the next 18 months.
Three elements go into determining electric rates: Generation accounts for 50 percent or more of a household’s monthly bill, while transmission and distribution costs share the remaining 50 percent.
Caps on all three went into place in 1997 in what leaders thought would open the field to competition, forcing lower rates. The competition never materialized and electric prices were held artifically low, some leaders maintain.
FirstEnergy/Penelec currently has a proposal for purchasing power for the next several years awaiting review and approval by the state Public Utility Commission.
“I understand Penelec has some problems,” said state Rep. Carl Walker Metzger,
R-Berlin. “They’re using profits from elsewhere to prop up this region.”
The rates charged by a utility company when the caps went into effect will have a lot to do with how much of an increase consumers see following deregulation, said PUC spokeswoman Jennifer Kocher.
“It varies from company to company,” she said. “If rates are high. the increase will not be as great. The electricity market has done what the gasoline market has done.”
When the price caps were implemented, gasoline was selling for $1.36 per gallon on average, Kocher said. A year ago, it was up to $3.99, then dropped sharply before jumping again this summer.
“The PUC is not making any predictions,” she said.
Cooperatives
Power prices are expected to remain steady for the 13 rural electric cooperatives statewide, including Somerset REC.
The Somerset cooperative serves nearly 12,000 residential and business customers in Somerset County. Indiana-based Rural Electric Energies has nearly 7,000 Cambria County customers.
“We’re sitting right now in a situation where we’re feeling pretty good,” said Rich Bauer, general manager of Somerset REC, which he said expects to have the lowest kilowatt rate in the state following deregulation.
When many utility companies went out of the generation business a decade ago, the cooperatives held onto nuclear and hydro interests, including a plant at Raystown Lake in Huntington County, Bauer said.
“Penelec sold all of their generating (plants) and now must purchase everything on the open market,” Bauer said. “We go out for 30 percent of our power needs.”
Alternatives
Meanwhile, state legislators are floating a number of proposals aimed at softening the hit from deregulation.
Possibilities include:
• Extending the caps by two years.
• Setting a cap based on a percentage of annual increase for perhaps three years.
• Forming a Pennsylvania Power Authority to enable broad electricity purchases for distribution to utility companies.
The authority is worth considering, said state Rep. Bryan Barbin, D-Johnstown, a member of the house Energy and Environmental Resources, and Consumer Affairs committees.
“I’m still listening to this stuff and I’m going to vote to make sure the rates are as low as they can be because we are in a recession,” Barbin said. “I think there is some merit in the power authority.”
Placing caps on the percentage of increases may also be a doable option, said Barbin, who like other legislators in the region is concerned that steep rate hikes could drive small to medium manufacturers out of the state.
A two-year extension of the caps appears to have little local legislative support.
“I don’t think that is going to happen,” said state Rep., Gary Haluska, D-Patton.
After going 10 years with capped rates, the power companies probably can make a case for a rate hike, Haluska said.
“There needs to be some limits in percentage of increase over the next couple years to ease everybody into it,” Haluska said.
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