Rendell urges law to phase in electric-rate hikes

Gov. Rendell urged lawmakers yesterday to spare Pennsylvania residents painful increases in electric bills expected as rate caps expire over the next couple of years.

In Peco Energy Co.'s Southeastern Pennsylvania territory, rates are expected to increase 20 percent on average in 2011, with higher spikes anticipated in other parts of the state.

"I don't see how we can ask Pennsylvania families to pay more in these tough times when electric utilities are already making so much money," Rendell said, citing billions in profit last year at Peco parent Exelon Corp. and PPL Corp., two of the state's largest electric companies.

At a hearing held by the House Environmental Resources and Energy Committee in Philadelphia, Rendell said there would be dire consequences for businesses and consumers if the rate caps instituted as part of electric deregulation in the mid-1990s were allowed to expire without some action to mitigate the increases.

Rendell urged legislators to pass a bill requiring a phase-in of rate increases, with utilities bearing the cost of delayed payment for higher-priced electricity. However, he said, he would sign a bill that extended the caps if that were all that landed on his desk.

"Extending the rate caps . . . would not be the best result for the commonwealth," Rendell said. It would make it even harder to attract new electric-generation capacity to serve Pennsylvania. That puts Pennsylvanians in a different kind of jeopardy.

"Not having sufficient energy is probably a worse outcome than having it at a high price," Rendell said.

Exelon intends to file a plan with the state Public Utility Commission to deal with the end of the rate cap by phasing in increases.

Such a plan by PPL, of Allentown, was approved last month by the PUC. The plan allows customers starting this fall to pay in advance for part of an increase expected at the beginning of 2010, PPL spokesman George C. Lewis said. PPL will pay customers 6 percent interest on that advance money, he said.

The public-utility portion of PPL, as opposed to the electric-generation company, has already started signing supply contracts for 2010. The current capped price under long-term contracts signed early this decade is 5.5 cents per kilowatt-hour, Lewis said. The new contracts call for 10.5 cents per kilowatt-hour.

One benefit that consumers will see from the lifting of rate caps is an end to charges for "stranded costs" on their energy bills. Those costs were imposed to help energy companies transition to a competitive market environment after years of regulation. That market failed to develop as expected.

Philadelphia's consumer advocate, Lance Haver, who attended yesterday's hearing, said he was glad to see that the state legislature was finally acting.

"After all," he said, "it was the state that made the mistake of deregulating the market, which is creating problems throughout the country and here in our region."