Press Release

    Harrisburg, Pa., August 12 ¾ The Pennsylvania Public Utility Commission (PUC) and Pennsylvania Power & Light (PP&L) today agreed to settlement terms that guarantee customers a 4 percent rate cut in 1999, an extension on the transmission, distribution and generation rate caps, and an increased shopping credit. Added together, PP&L customers could see savings from 14 percent to15 percent in 1999.

    In exchange, the Allentown utility will recover $2.97 billion in stranded costs over 11 years.

    The PUC will vote on the settlement at its August 13 public meeting. Thursday’s vote will be followed by a public comment period and an anticipated final PUC vote on August 27. Under the proposed settlement, PP&L agrees to withdraw all its legal challenges if the PUC approves the deal.

    "Today’s settlement benefits PP&L’s customers while balancing the interests of PP&L, its employees, shareholders and the other parties," said PUC Communications Manager Kevin Cadden. "PP&L, in turn, will be able to maintain a strong corporate presence in Allentown."

    Also signing the settlement today was the International Brotherhood of Electrical Workers; Mid-Atlantic Power Supply Association, representing generation suppliers; rural electric cooperatives; Office of Consumer Advocate; Office of Small Business Advocate; and environmentalists.

    Today’s settlement increases PP&L’s shopping credit from 3.72 cents per kilowatt-hour (kWh) to 3.81 cents per kWh. Shopping credits will vary from one rate class to another and will increase over time to match anticipated increases in the market price of generation. Customers save money when they purchase electricity for less than 3.81 cents per kWh.

    In addition, PP&L agrees to extend the cap on transmission and distribution rates through December 31, 2004 ? three and a half years beyond the statutory requirement. Generation rates will also be capped until December 31, 2009, or four years beyond what is required by law.

    Under today’s action, PP&L can recover $2.97 billion in stranded costs over 11 years, beginning January 1, 1999. The company had originally been allowed to recover $2.86 billion in stranded costs over eight and one-half years. Stranded costs will be collected through a competitive transition charge on customer bills. PP&L will also be allowed to securitize, or refinance, its debt, but 75 percent of any savings must be passed onto customers. In addition, the utility is required to transfer its retail marketing function to a separate, affiliated corporation.

    The settlement also contains provisions to allow for competitive metering and billing services; competitive safeguards to ensure fair and non-discriminatory competition, and the expansion of universal service programs and economic development.

    “Unbundling of metering and billing may allow competitors to provide these services to customers at reduced cost,” added Cadden. “And, more importantly, it gives customers the opportunity to use advanced technology to monitor their usage and conserve energy.”

    On January 1, 2002, 20 percent of all PP&L residential customers will be assigned to a competitive provider of last resort, or default supplier. The competitive default supplier will be selected through competitive bidding and will have to meet specific renewable energy requirements in its energy supply. Two percent of the energy must come from renewable power sources and will increase 0.5 percent annually.

    “Pennsylvania is the first state in the nation to provide for a competitive default supplier,” said Cadden, “as well as being the first state to mandate a renewable source option.”

    Beginning January 1, 1999, one-third of PP&L customers will be able to buy power from the supplier of their choice. Another third will be able to choose on January 2, 1999, and the remainder on January 2, 2000. The Allentown-based PP&L serves 1.2 million customers in eastern and central Pennsylvania.

    PUC Chairman John Quain invited PP&L to participate in settlement talks on July 10 after the utility sued the PUC in Commonwealth Court and federal court over the amount of stranded costs it would be allowed to recover. The utility originally sought to collect $4.04 billion in stranded costs. On July 9, the PUC denied PP&L’s reconsideration request to increases the amount of stranded cost recovery to $4 billi

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