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PUC Approves PPL's Plan To Mitigate Projected Rate Increases
The Public Utility Commission this week approved a settlement to allow PPL Electric Utilities Corp. to implement a plan to help customers mitigate the effects of electric generation rate increases that will occur when its rate cap expires December 31.

The Commission voted unanimously to approve the rate mitigation plan, which is a voluntary program that allows customers to defer a portion of PPL's January 1, 2010, forecasted rate increase. Qualifying customers that voluntarily opt into this program will receive a credit on their bills to partially offset the initial financial impact of any rate increase, followed by a charge in the later years to repay the first year credits and accrued interest.

The credits are designed to limit the increase of total charges, on an average for each rate class to no more than 25 percent in 2010 and an additional 25 percent in 2011 based on PPL's current estimate of the rate increase. Customers ultimately will pay the full amount of the increase plus the carrying costs on the deferred portion.

The rate mitigation option will be available to most PPL residential, small commercial and some portion of industrial customers and will provide an opportunity to mitigate the anticipated increase in their electric bills over a period of up to three years from January 1, 2010, to December 31, 2012. Customers who shop for generation service may also participate in the rate mitigation plan. The deadline for customers to enroll is December 15.

The settlement was reached among the company, the PUC's Office of Trial Staff, the state's Office of Consumer Advocate, the state's Office of Small Business Advocate, Retail Energy Supply Association, Direct Energy Services, LLC, Richards Energy Group, Citizens for Pennsylvania's Future and Constellation Energy Group Inc. Additionally, the PP&L Industrial Customer Alliance did not oppose the settlement petition.

The Commission approved a motion by PUC Vice Chairman Tyrone J. Christy directing PPL to file an annual report to track uncollectible expenses associated with the costs of the RMP and to submit its customer-education materials related to the RMP for Commission approval.

The Commission has approved energy procurement rules that will reduce default service rate volatility by directing electric utilities to acquire a portfolio of energy products of different contract lengths and at different points in time. PPL has already begun soliciting its default service loads for 2010 through a series of competitive auctions and has purchased about 87 percent of its supply for residential customers. With these purchases, the estimated increase for PPL's residential customers is about 30 percent, according to updated electric price estimates issued by the Commission on July 7.

Rate caps were placed on generation rates as part of the 1996 restructuring of the electric industry. In May 2007, the Commission approved a plan to mitigate and prepare Pennsylvania electricity customers for significant price increases that may occur as generation rate caps expire.

The mitigation measures include: energy efficiency; demand side response; default service supply procurement to help insulate customers from large fluctuations in market prices; rate mitigation programs; updated low-income programs; the removal of barriers to retail choice; and consumer education.

Consistent with this plan, in September 2007, the Commission adopted a policy statement determining it was in the public interest for customers to have reasonable opportunities to mitigate the effect of the expiration of rate caps. In August 2008, the Commission approved a settlement for PPL's Rate Stabilization Plan.

Under the RSP, PPL customers can choose to make additional payments through Dec. 31, 2009. Those payments will then be applied as a credit on their bills in 2010. Customers cannot simultaneously participate in the Rate Stabilization Plan and the Rate Mitigation Plan.

Details From PPL

“We are committed to giving our customers options for spreading out higher prices, tools that can help them save energy and money, and information they can use to consider offers from alternative electricity suppliers,” said David G. DeCampli, president of PPL Electric Utilities.

The deferred payment option lets residential and small-business customers defer increases of more than 25 percent when higher electricity prices take effect starting January 1. Customers who voluntarily choose this option will repay the deferred amounts, plus 6 percent interest, over a one- or two-year period.

PPL Electric Utilities will provide information to eligible customers about the deferred payment option in the fall, and invite them to enroll by December 15.

PPL Electric Utilities already offers a prepayment option for spreading out the 2010 increase over several years. About 140,000 residential and small-business customers, 10 percent of those eligible, enrolled in that option when it was offered in fall 2008. Customers may still enroll in this program through the end of 2009.

Customers with the prepayment option have an amount added to their monthly bills that will be used to offset a portion of the increase. They earn 6 percent interest, paid by PPL Electric Utilities, on their advance payments.

PPL Electric Utilities does not generate electricity, and must purchase it from suppliers in a competitive market for customers who do not choose their own supplier.

With five of the six rounds of electricity supply purchases for 2010 completed, PPL Electric Utilities estimates that the average residential customer bill will increase by 30.4 percent, the average small-business customer bill will increase by 18.9 percent and the average mid-sized business customer bill will increase by 36.8 percent.

These estimated increases follow an extended period of capped rates that were set back in 1998 as part of an agreement with the state to implement the transition to a fully competitive electricity market. No state that opened electricity markets to competition has had rate caps in effect for a longer period than Pennsylvania.

For more information, visit the PUC's Electric Rate Mitigation webpage.

7/27/2009

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