HARRISBURG, July 1, 2008 - Blaming utility companies for being “more concerned with protecting their windfall profits than providing just and reasonable electric rates for their customers,” State Senate Democrats today said crucial legislation that would prevent the upcoming rate increases, establish new rules governing the procurement of electricity, and take steps to reduce demand will likely not be part of the state budget deal.

As a result, the Democrats said they would introduce numerous bills that would defer the rate increases and force the electric generating companies to take a serious role in stabilizing and minimizing consumer costs.

Democrats said the electric generating companies had an opportunity to partner with lawmakers to help stabilize the market and provide consumers with reasonable electric rates, but instead chose to cash in on the opportunity to charge people up to 10 times more for electricity than the cost of producing it.
They said runaway electric costs could spark a crisis that could cripple the economy and spur thousands of utility shut-offs. Democrats claim the looming crisis was driven largely by the utter failure of electric competition, electric company greed and lax federal regulators that allowed generating companies to charge at rates well above their costs.

The Democrats called former Gov. Tom Ridge’s 1996 deregulation law, which failed to generate the touted competition or lower electric prices, an “unequivocal failure.” The law prompted litigation that challenged utility companies’ windfall at the expense of consumers. The settlement of those lawsuits limited rate hikes over the past 10 years, but electric generating companies may now reap windfall profits.

"Proponents of deregulation predicted that competitive market forces would result in lower prices for consumers, but there is very little actual electric competition in Pennsylvania today," Senator Vince Fumo (D-Philadelphia) said. "While it is too late to return to the days of regulation, when the PUC set rates that allowed utility companies a reasonable profit, we should enact statutes that are in-between a regulated and deregulated system, to prevent companies from gouging their captive customers under their de-facto monopoly."

Sen. Lisa Boscola (D-Northampton/Monroe), who sharply criticized PPL officials at a recent hearing in Bethlehem for trying to collect higher rates before the rate caps expire, said many of the generating companies are brazenly boasting about collecting massive profits in their financial reports.
“They are satisfied with charging their customers up to five times more than what it costs them to generate the power,” Boscola said. “While many family and business electric bills will go up by more than 50 percent, PPL is brashly predicting a corporate earnings margin jump from $1.8 billion this year to an obscene $3.3 billion in 2010.”

She added that the same PPL financial report revealed that the company anticipates producing electricity at a cost of $16 per megawatt-hour or less, while charging their customers an average price of $91.42 per megawatt-hour.

Despite threats from utility companies that they would sue, Boscola has introduced legislation that would extend the rate caps while legislators seek to find solutions to stabilize the market and protect consumers.

State Sen. Jim Ferlo (D-Allegheny) added, “We need to take strong steps to protect consumers from being gouged.  While generation companies are predicting record profits, I expect my constituents will see their pocketbooks stretched to their limits.   We must design an electric market in Pennsylvania that provides effective consumer protection laws, maximizes the buying power of residential electric customers through aggregation, and holds utility companies to the highest standards for rate making.”
Ferlo said aggregated Ohio customers saw their electric bills drop from 5 to 10 percent.

State Sen. Sean Logan (D-Allegheny/Westmoreland) added, “Utility shut-offs have already gone up 37 percent compared to last year. Unless we take decisive steps soon, I fear for how many people will be unable to pay and have their electric service shut off once deregulation reaches its statewide peak in 2010.”
Senate Democrats are proposing:

• gradually phasing in the higher electric rates over a five-year period. The proposal would not permit deferral or cost recovery for utilities (as House Bill 2201 permits);
• requiring portfolio-type contracts where electric companies can enter into long term contracts and purchase at “least cost.” Currently, companies can charge higher rates by purchasing electricity at “prevailing market rates.”
• requiring the Public Utility Commission (PUC) to make sure utility companies are not manipulating the market to charge consumers higher rates. House Bill 2201 has no such requirement;
• requiring utility companies to more actively work and share the cost with consumers on items like smart meters that could help save money by cutting consumption. Since items like smart meters benefit only certain customers, the Democrats said they would make participation in such programs optional rather than mandatory;
• banning winter terminations in nearly all cases, providing more low-income assistance and requiring tougher notification requirements before a utility can shut off a resident’s power. The Public Utility Commission last week reported that statewide shut-offs have risen 55,366 this year -- 37 percent higher than for the same period last year. Metropolitan Edison Company shut-offs are up 97 percent, while PPL shut-offs are up by 124 percent; and
• potentially creating a “state power purchase agency” to buy energy generation below the PJM market costs, reducing peak pricing, and removing inefficient plants from the market. The agency would be funded through a generation assessment on electric generating companies.

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