The Public Utility Commission this week released its fourth comparison of current market prices for electric generation with capped rates paid by consumers now. The PUC said that, while the new figures reflect significantly lower market prices than those released last August, they still validate the importance of current and future steps to mitigate potentially significant electricity rate increases.

 

The Commission notes that lower market prices could translate into smaller percentage increases for customers if rate caps were to expire today. While this trend is a positive development, the Commission emphasizes that market prices are subject to constant change and that there are no guarantees that the market prices will continue to fall. The prices may stabilize or trend upward in the future.

 

The Commission members said they will not be complacent about continuing its actions to mitigate potential rate increases. For customers, energy conservation and efficiency are still recommended long-term strategies that should provide benefits regardless of where market prices trend in the future.

 

The charts released today show differences between capped rates and estimated market prices at the end of the second, third and fourth quarters of 2008 and the first quarter of 2009 for the four companies (Metropolitan Edison Company, PECO Energy Co., Pennsylvania Electric Co., and Allegheny Power Co.) where rate caps expire December 31, 2010.

 

PPL's current market prices are not included in the most recent chart because the company has completed five of its six electricity generation auctions. The completion of the majority of its auctions means that PPL has purchased about 87 percent of their load, and its price for the post rate cap period is established for the most part. According to the company, residential consumers would see a 30.4 percent increase when rate caps expire on December 31, 2009.

 

If current market trends continue, consumers may be able to achieve better prices through a competitive electric generation supplier when PPL's rate cap expires.

 

Wayne Williams, Ph.D., Director of the PUC Bureau of Conservation, Economics & Energy Planning, said the calculations released this week estimate the increases consumers would see, on average, if rate caps expired today and the state's four electric distribution companies still under caps immediately began charging prices based on current short-term market conditions.

 

The market price of electricity is very volatile and 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 does not have jurisdiction.

 

Director Williams noted that these estimates identify current market prices in the short term, in comparison with capped rates, and do not in any way represent a Commission projection of future prices when the remaining rate caps expire.

 

The Commission anticipates that actual post-rate cap prices for each distribution utility will reflect a portfolio of resources, obtained over time, which will mitigate the effect of monthly and daily changes in the market rates for energy.

 

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. Customers in service territories where rate caps have already expired have had varying experiences, with some experiencing increases.

 

For more information, visit the PUC's Electric Price Estimates webpage.