News

July 2, 2008

Electricity price plan eyed

State senators concerned about cost increases when deregulation takes effect.

HARRISBURG – Members of the state Democratic Senate Caucus proposed Tuesday a plan to lessen looming electricity price shocks, but industry representatives said the proposals would just increase prices further.

Flipping through numbers and graphs on a slideshow, the senators argued that electricity-generating companies “conned” the state into approving deregulation and are receiving unnecessary profits that amount to “unadulterated thievery.”

Comparing them to companies such as ExxonMobil that consumers often feel value bottom lines over customer welfare, the senators said allowing electricity generation to become fully deregulated will mean escalating prices, inflated profit margins and even greater economic hardship for consumers.

“That is a rip-off. I have a Wharton MBA. I understand markets. That is not a true market,” Philadelphia Sen. Vince Fumo said in the Capitol Building.

Fumo was flanked by other senators, including fellow Democrat Lisa Boscola, whose Northampton County senatorial district borders the hometown of PPL Corp.

Boscola had previously called for “pulling the plug” on deregulation, but the caucus has backed away from that stance. The new proposal, some of which has been added as an amendment to Senate Bill 1134, would require utilities to prove that they’re purchasing the “least cost” power, inking long-term contracts and developing a portfolio of contracts over varying timeframes.

They also called for capping annual rate increases at 5 percent or the annual inflation rate, whichever is lower, and stiffening service shutoff requirements. Fumo acknowledged, however, that the legislative fight will occur after he retires at the end of this session and might not come up until next year.

The senators threatened that further “market corrections” might be necessary, including taxing electric-generation profits and creating a state-run power purchase agency to pool consumption demands.

In response, industry representatives said such proposals will only increase prices and threatened legal action if deregulation is derailed.

Doug Biden, the president of the Electric Power Generation Association lobbying group,and others argued the industry took the risk of sinking billions into building plants, of which newer ones aren’t expected to recoup costs, and that they should be allowed to reap the benefits when the economics change.

The industry argues fuel and materials prices are going up, just as in other fields, so a corresponding rise in the price of their product is natural.

The caucus members argued, however, that what’s really rising is executives’ salaries, and they wagered that companies will want to negotiate an agreement before the issue receives much public scrutiny.

“To those here who might be representing the more egregious energy lobbies, I can only say let’s get ready to rumble,” said Pittsburgh Sen. Jim Ferlo.

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