Updated Estimates On Capped, Market Electric Prices Released By PUC

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 that the numbers validate the importance of current and future steps to mitigate potentially significant electricity rate increases.

According to the estimates, the market trended upward this quarter by about 5 percent for residential consumers when compared to the October 2009 electric price estimates.

The Commission emphasizes that wholesale prices are subject to constant change and can be volatile. The prices may stabilize or trend upward or downward 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 by the PUC show differences between capped rates and estimated market prices at the end of the second, third and fourth quarters of 2008 and for all quarters of 2009 for the four companies still under rate caps. The rate caps for Metropolitan Edison Co., PECO Energy Co., Pennsylvania Electric Co., and Allegheny Power Co. will expire December 31, 2010. Information for PPL is not included because its rate caps expired December 31, 2009.

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 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.

For more information on what consumers can do to reduce their usage and prepare for electric rate cap expiration, visit the Consumer Education section of the Commission’s website.