The Electric Power Generation Association has joined other businesses in urging Gov. Rendell and state lawmakers to reject any extension of the rate caps on retail electricity prices.

Extending rate caps will only end up costing businesses and households more in the long run, according to EPGA.

The businesses - which collectively represent 1,387 facilities and 97,941 workers in Pennsylvania and purchase more than $125 million of electricity annually in the state - asked Gov. Rendell and all state policymakers in a recent letter for their "support for a competitive energy marketplace for the region by allowing the wholesale and retail electricity markets, with independent oversight, to continue to grow."

In their letter, the businesses urged lawmakers to oppose legislation that would extend rate caps because of the negative impact these caps can have on reliability and costs.

"All we have to do is look at what happened in California when the state capped electric rates," said EPGA President Doug Biden. "California was hit with rolling blackouts, and lost thousands of jobs. The state was forced to enter the market and buy power for utilities at higher rates, eventually resulting in even higher prices for businesses and households."

Biden said that it is a common misconception that the restructuring of the industry has increased generation costs within the industry, and that extending rate caps is the answer. Rather, higher fuel, construction and environmental costs take the most blame.

"Coal, oil, and natural gas costs have all increased far more than inflation over the past ten to twelve years," Biden said. "In addition, construction costs have increased by 130 percent since 2000, while wholesale power prices have not kept pace with these increases in generation costs. These rising costs, coupled with retail rate caps, are a train wreck waiting to happen, creating a real potential for future power shortages and even higher prices which no one wants."

Biden encouraged the Governor and lawmakers to support policies that will lead to sustainable wholesale and retail competition as a way of controlling electricity rates.

"The caps have actually worked against competition and lower long-term prices," Biden said. "They have effectively insulated customers from changes in wholesale market prices and greatly discouraged investment in conservation measures."

Placed on retail prices when electric industry restructuring began in 1998, the rate caps have already expired for utilities serving 15 percent of customers in Pennsylvania, and they will expire for the rest of customers in 2010-2011.

For more information, visit the PA Energy News website.

10/24/2008