Press Release

PUC Approves Plan for Penn Power to Provide Default Service POLR

Published on 4/20/2006

Filed under: Electric

HARRISBURG, Pa. – The Pennsylvania Public Utility Commission (PUC) today approved a provider of last resort (POLR) plan for Pennsylvania Power Co. (Penn Power) that is designed to provide consumers with the best possible price by encouraging participation in a competitive auction by suppliers.

         “Today’s Commission action eliminates the potential for cross subsidizations among rate classes and, even more importantly, to maximize opportunities for a more successful competitive bid process,” said Commission Vice Chairman James Cawley in a motion. “We have worked to craft a plan that will provide consumers with the best deal possible by creating an environment that will entice suppliers to take part.”

         “In a difficult energy market that we are witnessing every day reflected in changing oil and gas prices, this Commission continues to strive to protect the public interest when it comes to energy policy,” said Commission Chairman Wendell F. Holland. “The Commission has made a concerted effort to set into motion a POLR plan that will provide a process to establish a rate structure that is fair to all rate classes while making the market attractive to wholesale bidders.”

         The 1996 electric competition law requires electric companies to provide service to customers who have not selected an alternative generation supplier. This is commonly called provider of last resort service, or POLR.

         The Commission adopted a modified POLR plan for Penn Power that is designed to provide consumers with the best price possible by encouraging a larger number of wholesale electric suppliers to participate in a bidding process. Commissioner Bill Shane concurred with portions of the plan, but disagreed with other portions.

         The approved plan is designed to provide consumers with POLR service from Jan. 1, 2007, through May 31, 2008. Penn Power’s rates are currently capped at prices determined through restructuring agreements pursuant to the electric competition law. Those rates are set to expire Dec. 31, 2006. The Commission is obligated to approve a POLR plan with rates that reflect prevailing market prices and that allow Penn Power to recover all reasonable costs for service.

          The plan calls for wholesale suppliers to bid to serve three different customer classes including residential, small commercial and large commercial. The Commission’s preferred timeline has requests for proposals issued on May 4, 2006 with rates posted by July 27, 2006.

          The Commission also approved a motion by a vote of 3-2 that limited the qualifying alternative energy projects under the state’s Alternative Energy Portfolio Standards Act (AEPS) within the service territory of Penn Power’s Regional Transmission Organization – the Midwest Independent Transmission System Operator (MISO). Commissioners Terrance J. Fitzpatrick and Kim Pizzingrilli issued a statement dissenting on this issue.

          AEPS took effect on Feb. 28, 2005, and requires that a certain percentage of all electric energy sold to retail customers be derived from alternative energy sources such as solar, wind, hydropower, geothermal, biomass, and demand side management resources.  The law applies to both electric distribution companies (EDCs) and electric generation suppliers (EGSs), who must demonstrate their compliance on an annual basis.  The level of alternative energy required gradually increases to 18 percent according to a 15-year schedule. 

           Penn Power, a subsidiary of FirstEnergy Corp., serves about 138,000 residential, 19,000 commercial, and 215 industrial customers in western Pennsylvania.

           The Pennsylvania Public Utility Commission ensures safe, reliable and reasonably priced electric, natural gas, water, telephone and transportation service for Pennsylvania consumers, by regulating public utilities and by serving as responsible stewards of competition. For recent news releases, or more information about the PUC, visit our Internet homepage www.puc.state.pa.us.

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Docket No. P-00052188

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