PPL rate cap lift looms

HARRISBURG - PPL's rate caps come off two months from today, yet efforts to put limits on higher electric bills aren't making much headway - partially a result of Pennsylvania's prolonged state budget fight.

PPL plans to increase residential electric rates nearly 30 percent after the state-imposed rate caps in effect for the past decade expire Jan. 1. This will mean a $378 per year rate hike for the average household in PPL's service territory in Northeast and central Pennsylvania.

Starting in early 2007, a number of Democratic lawmakers called for action to help Pennsylvania consumers cope with the rate hikes anticipated in the wake of the lifting of the caps.

House Speaker Keith McCall, D-122, Summit Hill, and others sponsored bills to phase-in the rate increase over several years by limiting how much electric rates could go up each year. Citing the economic hardships faced by families during a severe recession, Gov. Ed Rendell called for a mandated phase-in of rate increases during his budget address in February.

But the 101-day delay in enacting the $27.8 billion budget has sapped much of the political will to tackle the relief issue, some say.

State Consumer Advocate Irwin Popowsky doesn't know if electric-rate legislation will be considered during the several weeks of session scheduled in November and December.

"I haven't heard very much in the past couple months, with all the focus on the budget," he added.

Harrisburg activist Gene Stilp suggested lawmakers used the budget battle as an excuse not to address rate relief.

"The Legislature has been hiding behind the budget process," he said. Stilp plans a tour of Northeast Pennsylvania lawmakers' offices later this month.

McCall spokesman Bob Caton acknowledged the budget stalemate threw a wrench into timely legislative action, but he said the issue isn't forgotten.

"The HB20 debates were unfortunately delayed by the unprecedented budget debate, and now the task is completing the table games legislation and completing the final pieces of the budget plan," added Caton. "The House has a full schedule of days on deck starting on Nov. 9, where we definitely will make sure this issue is high on the agenda."

Hearing canceled

The Senate Consumer Protection Committee canceled a hearing scheduled for Nov. 17 on PPL rate caps.

Utility executives have testified at public hearings that HB20 could harm their credit ratings. They want to be able to recover costs on any money they need to borrow to offset the lost revenues if rate hikes are limited.

The relief issue is more pressing for PPL's 1.4 million customers because rate caps for them end one year ahead of rate caps for many customers in the Philadelphia and Pittsburgh metro areas. Rate caps will be lifted Jan. 1, 2011, for customers of PECO, Allegheny Energy and First Energy.

Caps were put on electric rates with the start of electric deregulation in Pennsylvania in the late 1990s. The idea was to stabilize rates while utilities competed for customers outside their traditional service territories. But competition for residential customers didn't materialize to the extent that deregulation advocates envisioned.

While they still want action on a rate increase phase-in, Rendell administration officials also put stock in other steps, such as installing programmable thermostats to conserve electric use, PPL incentives and a recent burst of utility competition to help customers absorb rate-hike shock.

"The governor continues to support a bill that would allow customers to phase-in rate increases if they are double-digit," said Acting Department of Environmental Protection Secretary John Hanger in an interview. "It is a reasonable and prudent thing to do after 13 to 14 years of a rate cap."

Hanger served as a member of the Public Utility Commission when deregulation was enacted.

A sharp drop in wholesale prices for electricity since their peak in July 2008 has eased the situation, he said.

"Had the caps expired in July 2008, the (PPL) increase would have been much higher," added Hanger. "But we continue to believe the markets are volatile. They have shown they can go up very quickly."

Ways to save

On its own, PPL offered customers a rate phase-in program and encouraged prepayment of electric bills to spread the costs and earn 6 percent interest on those prepayments.

More than 100,000 PPL customers are making prepayments.

Hanger and Popowsky said the 6 percent interest offered by PPL is far higher than the interest return on certificates of deposit.

The PUC recently took actions to entice other electric generating firms to compete for PPL customers. Dominion, a Virginia-based utility, has responded with a limited discount plan for residential customers.

"We are hopeful that more competitors will enter the market with bargains in the PPL service territory," added Hanger.

A state law enacted last year addressed energy cost issues by requiring utilities to file energy conservation plans and setting a 15-year timetable to install smart meters in homes to regulate electric use, said Erik Arneson, spokesman for Senate Majority Leader Dominic Pileggi, R-9, Chester.

Stilp predicted that customer ire over the 30 percent rate hike will be directed at lawmakers.

"It is an economic tsunami that is going to hit Jan. 1 in the PPL service territory," he said.

Contact the writer: rswift@timesshamrock.com