Executives from the Electric Power Generation Association said that legislation creating a Pennsylvania Power Authority for the purpose of owning power plants and imposing a new tax on existing plants would raise electricity prices, discourage private investment in electricity infrastructure, and place taxpayers at risk for poor decisions by government officials.

 

"Right now in the electric generating industry, the risk of bad decisions falls on private investors, as it does in most other areas of our economy," said Doug Biden, President of EPGA. "This bill would put taxpayers and customers on the hook for investment decisions by political appointees, and would undermine incentives that have created a much more efficient generating industry in recent years," Biden added.

 

"This bill would authorize more government control of the generating industry than existed even before electricity competition began," said EPGA General Counsel Terry Fitzpatrick, a former Chairman of the Public Utility Commission. "The legislation misses the mark because government ownership of generating plants will not change the higher fuel and construction costs, and more stringent environmental requirements, that have driven up electricity prices over the past decade," he added.

 

Since 2008, when the legislation was introduced, wholesale electricity prices have dropped by roughly 50 percent due largely to falling prices for the fuels used in power plants. The independent market monitor of PJM Interconnection, which oversees wholesale electricity markets in most of Pennsylvania, has consistently concluded that wholesale electricity prices are competitive because they track changes in these types of underlying costs.

 

"The drop in wholesale prices since last summer shows that the laws of supply and demand apply to electricity prices just as they do to other prices," Fitzpatrick said. "Massive government intervention in the electric generating industry is unnecessary and unwise."

 

Biden and Fitzpatrick sent a memorandum to members of the Committee pointing out flaws in the legislation and asking the members to maintain Pennsylvania's commitment to competitive electricity markets.

 

Tyrone Christy, Vice-Chairman of the Public Utility Commission, expressed his concern about the potential volatility of electric prices when all rate caps expire in the state. He said the model used by PJM, the regional electricity market, uses a complex, artificial pricing mechanism that looks nothing like it did when deregulation of the electric industry was adopted in 1996. The only way to avoid rate volatility is to increase competitiveness through the creation of a power authority to build power plants that provide energy through long-term contracts.

 

Robert Powelson, Commissioner of the Public Utility Commission, submitted written comments to the Committee saying in part, "...in my view, asking residential customers to shoulder the burden of this monumental policy request and expecting the authority to have the ability to immunize them from the ups and downs of the wholesale power markets is not feasible.

 

"I am far from convinced that consumers would not be negatively impacted by the creation of a governmental power authority, and I fear intervention in energy markets is not a prudent course of action for the Commonwealth to take at this time, particularly considering Pennsylvania's historic budget deficit and staggering unemployment rates.

 

"Furthermore, I believe the creation of a governmental power authority to manage Pennsylvania's energy sector is not practical due to the need for technical and financial expertise of its managers, the lack of propert cost-control incentives and the overall i ntricate nature of such a structure."

 

He noted since 1996 Pennsylvania has seen the development of over 8,400 megawatts of new power generation which private investors-- not ratepayers-- have helped finance; to the tune of over $12 billion. "However, under a power authority the risk of failing to perform falls upon taxpayers rather than shareholders, who are often better able to take on and manage investment risks."