Press Release

PUC Reaffirms DQE Order, Grants Large Customers Additional Year of Fixed Prices

Published on 9/30/2004

Filed under: Electric

HARRISBURG – The state Public Utility Commission (PUC) today reaffirmed its August 19 decision setting electricity generation rates for Duquesne Light (DQE) small customers for a three-year period, but agreed to provide large customers an additional year of fixed price service.

In a motion by Commissioner Kim Pizzingrilli, the PUC said the initial 17-month period for fixed rate service for large customers would be followed by an additional 12-month period in which the generation supply would be obtained through a competitive bid.

“ The existence of a fixed price service option will provide both Duquesne and its commercial and industrial customers with a sufficient time frame in which to become familiar with and transition to the PJM market structure and with hourly priced service,” said Commissioner Pizzingrilli.

Chairman Terrance J. Fitzpatrick, Vice Chairman Robert K. Bloom and Commissioner Glen R. Thomas supported the motion. Commissioner Wendell F. Holland concurred in part and dissented in part. (Commissioner Pizzingrilli motion, Chairman Fitzpatrick statement).

“ In approving the additional time period for the fixed price provider of last resort service (POLR), the Commission does so solely as a means of transitioning large industrial consumers to a more mature competitive electricity market,” Commissioner Pizzingrilli added. “The Commission has every reason to believe that the competitive market in Pennsylvania will respond to this POLR plan in a manner that creates more and better opportunities for large industrial consumers.”

The PUC’s August order outlined DQE’s obligation to provide generation service to customers who don’t buy electricity from a competing supplier, referred to as provider of last resort service.

The PUC approved DQE’s request to raise generation rates for residential and small commercial and industrial accounts by 11.5 percent in the years 2005 through 2007. But the Commission rejected the company’s request for a second three-year term, which would have automatically raised rates by another 9.5 percent in 2008 and kept them at that level through 2010.

The PUC said it was too speculative to set rates for a second three-year period, and emphasized that the company could come back and ask for a second fixed-rate term near the end of the original one.

“Duquesne has referred us to no evidence of record or presented any arguments that lead us to conclude that we were in error in our determination to approve the proposed rates for a three-year term,” the Commission said in its reconsideration order today. “As we stated in the [original] order, there is nothing which precludes Duquesne from seeking a second three-year term as it has originally proposed.”

The Commission also rejected for a second time the company’s request to impose switching restrictions on customers who choose another supplier but then return to DQE, saying the requirements would clearly violate the electric choice law by treating returning customers differently from new customers. The proposed rules would have required returning customers to stay with Duquesne for a minimum one-year contract, while new customers can select another supplier at any time.

In addition, the Commission emphasized that, contrary to statements made by DQE, the plan it approved for large commercial and industrial accounts does not force companies to buy electricity on the hourly spot market. With today’s action, DQE and its customers have 29 months - until June 1, 2007 - to prepare for hourly priced service and can select a fixed priced plan in the interim.

“Duquesne’s arguments also completely ignore the fact that customers are free to leave the hourly priced service at any time, with no penalty,” the PUC said in its order. “Those customers can leave for the competitive market or can move onto the fixed priced service.”

Commissioner Pizzingrilli’s motion permits DQE’s competitors to petition the PUC to end the additional 12-month of fixed price service. Competitors would have to demonstrate that sufficient opportunities existed in the competitive market and therefore large customers would not be harmed by eliminating the extra year of fixed prices.

A separate motion by Commissioner Thomas related to DQE’s compliance filing for its large customers POLR plan was adopted 5-0. (motion)

To learn more about shopping for electricity in Pennsylvania , log onto www.utilitychoice.org.

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.

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Docket No. P-00032071

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