The Public Utility Commission this week released its quarterly comparison between current market prices for electric generation and capped rates currently paid by consumers.

The PUC said 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 while energy prices are lower, wholesale market prices – which are made up of two major components (capacity and energy) – are higher overall since the March estimate. In general prices remain markedly lower than August 2008.

The Commission emphasizes that wholesale prices are subject to constant change and can be volatile. The prices may stabilize or trend upward in the future. Therefore, the Commission will continue its actions to mitigate potential rate increases. For customers, energy conservation and efficiency are 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 and second quarters of 2009 for the five companies still under rate caps.

The latest report shows residential, commercial and industrial market prices have dropped dramatically since the first report was issued in June of 2008.

On average, residential market prices were 15 percent above capped process this year compared to 73 percent last year. But individual companies vary considerablly.

For PECO, residential market-based prices are 4.6 percent below the capped price (last year it was 34.5 percent above), Allegheny Energy is 14.2 percent above (last year it was 104 percent above), PPL 17 percent above (last year it was 67.4 percent above), Pennelec 22 percent above (last year it was 78.7 percent above) and Met-Ed is 26.4 percent above (last year it was 81 percent above).

Rate caps for PPL Electric Utilities Inc. expire December 31, 2009, while the rate caps for Metropolitan Edison Co., PECO Energy Co., Pennsylvania Electric Co., and Allegheny Power Co. expire December 31, 2010.

Wayne Williams, Ph.D., Director of the PUC Bureau of Conservation, Economics & Energy Planning, said the calculations released today estimate the increases consumers would see, on average, if rate caps expired today and the state's 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 changes that result from factors 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. Actual post-rate cap prices for each 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.

For companies such as PPL and Allegheny, where a majority of the load for certain customer classes has been purchased, more accurate post-rate cap price auction results are provided.

These prices reflect a portfolio of resources, obtained over time, which mitigated the effect of monthly and daily changes in the market rates for energy. This illustrates that if current market trends continue, consumers may be able to achieve better prices through a competitive electric generation supplier when rate caps expire.

The Commission has engaged consumer advocates and industry experts in efforts to mitigate any price increases in future electric generation prices.

The Commission has been working to educate consumers; develop strategies to remove barriers for suppliers providing competitive electric service; approve phase-in or pre-payment plans and direct all utilities to file such programs if electric rates increase by more than 25 percent; update low-income programs that provide budget assistance; and implement default service pricing that reflects the least cost to consumers over the long term.

The PUC also is continuing to explore reasonable, cost-effective programs that consumers and companies can implement to conserve energy or use it more efficiently.

Copies of the quarterly price reports are available online.

For more information on what consumers can do to reduce their usage and prepare for electric rate cap expiration, visit the PUC's Consumer Education webpage.