TimesLeader.com

Electricity Consumer advocate expects bigger increase due to rate caps expiring

October 3, 2008

PPL: 36.1% rate hike in 2010

By Jerry Lynott jlynott@timesleader.com
Business Writer

PPL Electric Utilities Thursday said monthly bills for residential customers will rise by 36.1 percent when rate caps expire in 2010, if future power costs match those the utility has paid to date.

But the state consumer advocate said he anticipates the rate will be higher.

The utility has been buying electricity in auctions since 2007 for customers who stay with PPL Electric as a provider of last resort.

“Each auction has produced a higher price, which is disturbing. I can’t say it’s unexpected either,” said Sonny Popowsky, the Pennsylvania Consumer Advocate.

He suspected the trend of rising costs will continue and called for PPL to buy a portfolio of resources including short-term and long-term contracts.

By law, PPL Electric Utilities, which does not own or operate power plants, must buy electricity on the open market. The purchased cost is passed on to customers without a markup by the utility.

The purchased price ranged from approximately $102 per megawatt-hour to nearly $113 during the first four of six auctions. The costs averaged $107 and the utility estimated an average increase for customers of 36.1 percent when the caps are lifted.

At that rate of increase, residential customers using 1,000 kilowatt hours a month will pay $38 more a month or approximately $462 more annually.

Small business customers will pay approximately 25 percent more and mid-size businesses will pay 44.3 percent more a month, according to PPL Electric Utilities.

The next auctions are in the spring and fall of next year, said Dan McCarthy, a utility spokesman.

“It’s always hard to tell” whether they will match the prices already approved by the Pennsylvania Public Utility Commission, he said.

“They are so many effects that people take into account when they’re pricing this energy,” McCarthy added.

Given the price movement in the markets since the auctions began, he said the estimated $12 per megawatt hour increase “is not that bad over a two-year period.”

Customers’ bills were expected to increase with the lifting of caps that have kept rates low and also have kept competitors from entering Pennsylvania. Utilities have been allowed to pass on higher costs they paid for power because of rising prices in the fuels used to generate electricity.

In anticipation of the caps’ expiration, PPL Electric Utilities sought and received permission from the PUC to make available a program that gives customers the option of making payments in advance to offset the higher prices. Payments made through the end of next year earn 6 percent interest and are returned as credits on monthly bills in 2010 and 2011.

Approximately 74,000 customers have signed up for the phase-in program, according to PPL Electric Utilities. The company, a subsidiary of PPL Corp., provides electric service to 1.4 million customers in 29 counties in the eastern and central regions of the state.

Jerry Lynott, a Times Leader staff writer, can be contacted at 570 829-7237.