In comments before the House Environmental Resources and Energy Committee this week, Gov. Rendell said the General Assembly must find a way for families and businesses to deal with expiring electric rate caps in a way that does not cause economic harm.

Senate Majority Leader Dominic Pileggi (R-Delaware) repeated his hope the General Assembly would provide a smooth transition to competitive electric markets. He expressed his disappointment at the lack of action when the Senate and House adjourned for the summer in July.

The Governor said that when electricity rate caps expire, beginning in 2010, Pennsylvania's consumers and employers will face increases of as much as 60 percent and that could pressure budgets already straining from sharply higher gasoline and home heating fuel costs.

"I want Pennsylvanians to be aware that a crisis is coming," said Gov. Rendell. "Just as we have seen price spikes for gasoline and winter heating fuels, like natural gas and heating oil, a price spike of equal or greater magnitude is coming for electricity. There is not much any of us here can do about the price of gasoline, but the price utility companies charge for electricity is currently set by the state. These controls are about to expire, but we have the power to keep prices in check if we choose to. But only if we choose to."

Gov. Rendell cited estimates from the state's consumer advocate, Sonny Popowsky, that show customers of the five utility providers with rate caps still in effect-PPL, PECO, West Penn (Allegheny Power), MetEd, Penelec and West Penn Power-could pay at least $4 billion more than today's rates for electricity by 2011. Of that total, the Governor said, $1.5 billion will be borne by the Commonwealth's families.

"For the past 10 years, Pennsylvanians have benefited from reasonably priced Pennsylvania's families and businesses will be paying significantly more for electricity due to legislatively mandated rate caps," said Gov. Rendell. "These caps are about to expire, and now every Pennsylvania family and business will need to ask whether it can afford to keep the lights on.”

If rate caps expire, prices could go up by- 30, 50, maybe even 60 percent or more in some cases. Altogether this could add up to more than $4 billion per year out of Pennsylvanians' pockets. For a household spending $1,200 per year for electricity, this price spike could add as much as $400 or $500 per year depending on where you live.

"I come before you today not just to sound the alarm, but to offer concrete solutions. But let me be clear - if solutions along the lines I will describe in a moment are not approved, the pressure to simply extend the current rate caps will be overwhelming. And none of us here today will be able to resist that pressure, nor should we. Consumers must be protected one way or another - that is our job, and we must do it."

House Bill 2200 (George-D-Clearfield) was passed by the House on February 12 and will help consumers save on their energy bills by conserving electricity and using it more efficiently.

The Senate Consumer Protection and Professional Licensure Committee held a hearing on the bill in May and had several hearings on the issue in prior months.

Once fully implemented, House Bill 2200 will save consumers $1.3 billion by 2012 on their energy bills through conservation and bringing down the cost of electricity during peak load times - when demand is highest and electricity is most expensive.

The bill would also help to cut peak demand during the 100 highest demand hours of the year when electricity is most expensive and which are typically the 100 hottest hours of the year. These 100 hours account for 1 percent of all hours in a year, but 20 percent of what customers pay a year for electricity is because of them.

According to the Department of Environmental Protection, if demand could be reduced by just 5 percent during the 100 most expensive hours of the year, consumers could save $233 million in electricity costs.

"We should embrace conservation wherever possible," said the Governor. "Conservation shrinks the energy bill of the person or business that conserves, but it also reduces total demand in the wholesale market, which keeps price spikes to a minimum. In tight markets, where supply barely covers demand, small reductions in demand can lead to steep drop-offs in price.

"Look at the oil markets. Today, a barrel of oil is trading for around $110, down from a record high of $147 per barrel in July."

House Bill 2201 (McCall-D-Carbon), which is awaiting a vote in both chambers, will require utilities to provide service to customers at the lowest reasonable rate. The bill would require utility service providers to procure power through a mix of short- and long-term contracts and spot market purchases, and obligate the Public Utility Commission to ensure that the procurement process is free of fraud, collusion or market manipulation.

In response to a question by Minority Committee Chair Rep. Scott Hutchinson (R-Venango), Gov. Rendell said Special Session House Bill 54 (George-D-Clearfield), that would extend the electric rate caps and require implementation of a least-cost portfolio, the bill is flawed because it is unconstitutional. (The House Environmental Resources and Energy Committee is set to consider the bill September 16.)

A copy of Gov. Rendell’s testimony is available online.

Others providing testimony to the Committee were Andrew Ott, Senior Vice President, PJM Interconnection, Mark Crisson, CEO of the American Public Power Association, Liz Robinson, Executive Director of the non-profit Energy Coordinating Agency and Curtis Jones, Jr., Philadelphia City Council member.

The Majority Chair of the Committee is Rep. Bud George (D-Clearfield) and the Minority Chair is Rep. Scott Hutchinson (R-Venango).

NewsClips: Governor May Seek To Extend Electric Rate Caps

Rendell Pushing For Action On Electric Rate Caps

Rendell Urges Law To Phase In Electric Rate Hikes

Electric Costs Apt To Soar In 2011

Rendell: Stagger Lifting Rate Caps

State Natural Gas Heating Cost to Rise 18 Percent, PUC Says

PUC Tries To Heighten Competition In Natural Gas Market

Rendell Urged To Release Aid To Help Poor With Heating Bills

Op-Ed: Better Electric Transmission Infrastructure Needed

Links: PUC Holds Special Hearing On Winter Heating, Energy Prices

John Hanger: High Energy Prices, Electric Rate Spikes Need Action

PUC Initiates Action Plan To Increase Natural Gas Competition

9/12/2008