The Public Utility Commission this week certified that the process used to determine the provider of last resort (POLR) prices for Pennsylvania Power Co. (Penn Power) customers was transparent and non-discriminatory, and reflected market-based prices.

The market-based prices mean the average residential heating customer will see about a 20 percent increase in their total bill; the average residential non-heating consumer will see about a 33 percent increase in their total bill.

The Commission voted 4-0 that the competitive bidding process produced electric generation prices for Penn Power that reflect prevailing market prices. The competitive bidding process was conducted by an independent group on behalf of Penn Power.

The 1996 electric competition law requires electric companies, or a Commission approved alternative supplier, to provide default electric generation service to customers who have not selected an alternative generation supplier. This is commonly called provider of last resort service, or POLR. The POLR prices for electric generation service are required to reflect “prevailing market prices,” according to the law.

The electric generation prices for Penn Power customers have not increased since 1992. Those 1992 rates are set to expire December 31, 2006. The rates were capped as a result of settlement agreements reached during the state restructuring proceedings. During the same period, inflation went up about 45 percent while the prices of natural gas and coal, both of which are used in the generation of electricity, doubled.

Customers do have the right to choose an electric generation supplier other than Penn Power. The current number of licensed alternative electric generation suppliers offering services in Penn Power territory is limited.

While the Commission has licensed many electric generation suppliers, the price caps that have been in place have deterred these generation suppliers from offering service in the Penn Power territory. However, the new market-based pricing may trigger electric generation supply marketers to come into the territory and begin to offer alternative products.

NewsClip: Electric Rates to Start Rising After Auctions

10/20/2006