Press Release

PUC Releases Model Comparing Current Market Prices with Capped Electric Rates Paid Today Under Electric Competition Act - PUC says estimates show importance of rate mitigation

Published on 8/14/2008

Filed under: Electric Gas

HARRISBURG – The Pennsylvania Public Utility Commission (PUC) today released a comparison of current market prices for electricity with capped rates paid by consumers now.  The PUC said the data validates the importance of current and future steps to mitigate potentially significant electricity rate increases.

The charts released today show differences between capped rates and estimated market prices at three recent points in time:  as of Aug. 8, 2008, the end of July 2008 and the end of June 2008.  The Commission intends to post quarterly updates on the PUC Web site, www.puc.state.pa.us, with the next update planned for January 2009.  Select “Electric” from the pull-down menu and select “Electric Price Estimates.”

A majority of electricity customers currently pay rates under caps, which are set to expire over the next couple of years consistent with the implementation of the state’s electric competition law.  Customers in service territories where rate caps have already expired have had varying experiences, with some experiencing increases.  The PUC will use the estimates released today as part of ongoing efforts to educate customers.

“The Commission is releasing these calculations because they demonstrate wholesale market volatility which could significantly impact the prices Pennsylvania customers will pay once rate caps expire,” said Vice Chairman James H. Cawley.  “We also are releasing the below estimates because they underscore the importance of mitigation measures such as those undertaken by the Commission to approve electric utilities’ rate-mitigation plans such as phase-in, or pre-payment, plans and to direct utilities to purchase power through a portfolio of resources.  Gov. Rendell and legislators are working on additional measures to help Pennsylvania consumers through energy efficiency and demand side response.” 

"Make no mistake about it, electric prices are going to increase dramatically," said Commissioner Tyrone J. Christy.  "It is vitally important that customers -- residential, commercial and industrial -- realize that rate caps are expiring.  They need to know what is happening with wholesale electricity prices, which will affect the retail rates that they will have to pay.  In my view, the Competition Act needs to be revisited and revised so as to reduce our reliance on the wholesale market that is producing these unnecessarily high prices."

The PUC also has promoted energy efficiency and demand side response; required electric utilities to educate their customers about rising energy prices and the resources to help them such as energy conservation, low-income programs and shopping for electricity supply; increased its involvement at the federal level where wholesale energy prices are set; sought to remove barriers to competition; and proposed a statewide consumer-education campaign.  The Commission also developed default service regulations and policy statements that should help mitigate much of the volatility and increases in future market prices for electricity.

Wayne Williams, Ph.D., Director of the PUC Bureau of Conservation, Economics & Energy Planning (CEEP), said the calculations released today estimate the increases consumers would see, on average, if rate caps expired today and the state’s five electric distribution companies (Metropolitan Edison Company, PECO Energy Co.,Pennsylvania Electric Co., PPL Electric Utilities Corp. and West Penn Power Co.)still under caps immediately began charging prices based on current short-term market conditions.  The market price of electricity is very volatile and changes on a daily basis, and is subject to large swings based on the price of fuels in the wholesale energy markets, over which the PUC does not have jurisdiction. 

Director Williams noted that these estimates identify current market prices in the short term, in comparison with capped rates, and do not in any way represent a Commission projection of future prices when the remaining rate caps expire.  The Commission anticipates that actual post-rate cap prices for each distribution utility will reflect a portfolio of resources, obtained over time, that will mitigate the effect of monthly and daily changes in the market rates for energy.             

The Pennsylvania Public Utility Commission balances the needs of consumers and utilities to ensure safe and reliable utility service at reasonable rates; protect the public interest; educate consumers to make independent and informed utility choices; further economic development; and foster new technologies and competitive markets in an environmentally sound manner.  For recent news releases, or more information about the PUC, visit our Internet homepage, www.puc.state.pa.us.

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Contact:

• Tom Charles
  Director of Communications
  717-787-9504
  thcharles@pa.gov