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Competitive Electric Market, Pricing Topic Of House Consumer Affairs Informational Meeting
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The House Consumer Affairs Committee this week held an informational meeting on issues related to the generation and distribution of electricity in the Commonwealth.
One highlight of the comments presented to the Committee was the fact that whenPennsylvania created its competitive market for electricity the price of electric was 15 percent above the national average, now they are 14 percent below.
Comments were provided by presenters on a number of issues--
-- Terrance Fitzpatrick, General Counsel for the Electric Power Generation Association, provided a general overview of Pennsylvania's competitive market for electricity and the roles of the key federal and state agencies in overseeing that market.
"The introduction of competition into the generation industry has created a more efficient industry and has benefited consumers," said Fitzpatrick. "Speaking from personal experience, when I was a PUC lawyer in the 1980's the Commission was investigating prolonged outages at some nuclear generating plants. Now, these plants operate at over 90 percent of their maximum capacity because they do not get paid if they are out-of-service. The increased efficiency of the generation industry is also reflected in testimony that PJM submitted to the PUC recently showing that wholesale prices have dropped by 23 percent from 1999 to the present when the prices are adjusted to remove the influence of higher fuel costs.
"Environmental policy is a major driver of wholesale electricity prices, and ultimately retail prices. To illustrate this, I note that PJM recently released a study of the impact that a federal cap-and-trade program for carbon dioxide would have on customers' electric bills. The study concluded that different proposals could lead to increases in these monthly bills ranging from $6 to $34 beginning in 2013.
"State environmental policies can also impose additional costs ongenerators and customers, but, in doing so they have the added disadvantage of placing Penrlsylvania at a corrlpetitive disadvantage relative to other states that : look to the federal government to set national standards. With regard to the climate change issue, actions by individual states will not have a meaningful effect on the earth's climate. Only the federal government can take effective action by establishing national standards and, even more importantly, using diplomacy to persuade other countries to limit their carbon dioxide emissions."
Fitzpatrick recommended--
-- Pennsylvania should maintain its commitment to competitive retail and wholesale electricity markets;
-- The retail rate caps should be allowed to expire on time. Extending the caps would make the inevitable transition to market prices more difficult, discourage building electricity infrastructure, and discourage conservation; and
-- Recognize that more stringent environmental requirements impose costs on consumers and state policies that are more stringent than federal requirement place Pennsylvania at a competitive disadvantage. --Michael Love, President and CEO of the Energy Association of PA, told the Committee when Pennsylvania created its competitive market for electricity the price of electric was 15 percent above the national average, now it is 14 percent below.
He supported authorization of an electric infrastructure Distribution System Improvement Charge to help pay for needed improvements in the electricity grid.
--Paul Bonney, Vice President and General Counsel for PECO, provided the Committee with an overview of PECO's efforts on purchasing renewable energy credits, promoting alternative energy generation, the use of natural gas and biodiesel in PECO's vehicle fleet and steps it is taking to improve the reliability of electric service.
--Sonny Popowsky, PA Consumer Advocate, called on the General Assembly to adopt legislation phasing in electric rate increases after caps come off in 2010 saying more needs to be done to make the wholesale markets truly competitive. Popowsky said he opposes a Distribution System Improvement Charge for electric systems saying utilities have been able to make improvements to systems for 20 years without a DISC.
--Richard Hudson, Chairman of the Retail Energy Supply Association, said his industry helps provide electric supplier choice to customers in Pennsylvania and encouraged the Committee to make the market for electric more, not less competitive. Chris Kallaher, Director of Government and Regulatory Affairs for Direct Energy, an RESA member, also provided comments.
--Jan Jarrett, President of PennFuture, told the Committee the Alternative Energy Portfolio Standards Act has been hugely successful in encouraging alternative sources of energy generation in the state. Although acknowledging there could be hardships when the electric price caps come off, she said extending the caps is not a solution. She also supported recent legislation-- House Bill 80 and Senate Bill 92-- to limit carbon dioxide emissions from coal-fired power plants.
Also providing comments were Doug Krall, Manager of Regulatory Strategy for PPL Electric Utilities,Anne Grealy, Executive Director of Customer Services at Allegheny Power and Stephen Feld, FirstEnergy Companies.
Next week the Committee has invited the Public Utility Commission to provide comments.
Rep. Joseph Preston (D-Allegheny) serves as Majority Chair of the Committee and Rep. Robert Godshall (R-Montgomery) serves as Minority Chair.
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2/6/2009 |
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