The Public Utility Commission has announced plans to release estimates comparing current market prices for electricity with capped rates paid by consumers today.

A majority of electricity customers currently pay rates under caps, which are set to expire over the next couple of years consistent with the implementation of the state's electric competition law.

"The Commission continues to develop a model to compare current market prices with capped rates," said Vice Chairman James H. Cawley. "We have consulted with stakeholders during this process, including a meeting earlier this week with consumer advocates to discuss the model and determine whether it is producing reasonably accurate results. However, customers must understand that these estimates represent a snapshot of current market prices in the short term, and do not in any way represent a Commission forecast of retail rates two or three years from now when the remaining rate caps expire."

Commissioner Tyrone J. Christy added that the Commission is "now considering that feedback, and we will issue the results of our model within a week. This will be an important tool that we will update regularly to educate and prepare our electric ratepayers for rising energy prices."

Wayne Williams, Ph.D., Director of the PUC Bureau of Conservation, Economics & Energy Planning, said "the Commission has been regularly monitoring the difference between the current capped rates and existing market prices for electricity. The market price of electricity changes on a daily basis, and is subject to large swings based on the price of fuels in the wholesale energy markets, over which the PUC exercises no jurisdiction. As part of our ongoing efforts to educate customers about the expiration of rate caps, the Commission began a dialogue with consumer advocates and utilities to develop a model for identifying the current market price of electricity in service territories still under rate caps. We are finalizing that model now."

The information that the Commission will release will demonstrate that market prices can fluctuate dramatically on a regular basis due to changes in fuel prices such as natural gas, oil and coal.

Consumers should be aware that the Commission has approved energy procurement rules that will reduce retail rate volatility by directing electric utilities to acquire a portfolio of energy products of different contract lengths and composition at different points in time.

This portfolio approach will reduce the level of risk in energy procurements, and thereby help insulate customers from large, unexpected rate changes.

This comparison is consistent with the Commission's May 17, 2007, Final Order (Docket No. M-00061957), by which the Commission began developing plans to educate electric customers statewide about rising energy prices and the resources available to help them, such as energy conservation, low-income programs and choice.

On January 1, 1997, the Electricity Generation Customer Choice and Competition Act went into effect and began the process for creating a competitive marketplace for electricity in this Commonwealth. This Act provided the framework for how electric generation would proceed in Pennsylvania, breaking down electric service into distribution, transmission and generation services.

Under the Act, distribution and transmission services continued to be regulated, generation services became unregulated, and the price of electricity became frozen at 1996 levels. During the subsequent implementation of the law, a schedule was set for the expiration of the rate caps for each electric distribution company.

Rate caps have already expired for customers served by Citizens' Electric Co.; Duquesne Light Co.; Pennsylvania Power Co.; Pike County Light & Power; UGI Utilities Inc.; and Wellsboro Electric Co. Some of those customers experienced significant rate increases while others are paying lower rates than when rates were capped. The majority of electric customers still pay rates capped at essentially 1996 levels.

Visit the PUC’s Electric Choice webpage for more information.

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