The Senate Consumer Protection and Professional Licensure Committee held a hearing this week on Senate Bill 1134 (Tomlinson-R-Bucks) providing for a transition to market rates in the electric utility industry, providing for energy efficiency and demand-response initiatives.

The Committee is chaired by Sen. Robert Tomlinson (R-Bucks) and the Democratic chair is Sen. Lisa Boscola (D-Lehigh).

Kathleen McGinty, Department of Environmental Protection Secretary, outlined the goals of Gov. Rendell’s proposals dealing with the rate caps issue saying that 2010 is looming and electric customers need a transition plan to prevent rate shock. She was also critical of the Public Utility Commission’s handling of the transition saying, “Unfortunately, the Competition Act is not being implemented in a manner that promotes low, stable rates over time.”

Sen. Boscola said the Senate Democratic Caucus has taken a position supporting a five year extension of the existing electric rate caps to which Secretary McGinty responded that course of action would not be her first choice.

Wendell Holland, Chairman of the Public Utility Commission, said the PUC put in place regulations outlining how utilities were to submit plans for making the transition to market-based rates in September and encouraged the Senate to give the Commission flexible authority to deal with rate mitigation plans.

Chairman Holland noted the Commission has been praised for its handling of rate transition plans, even by groups in Pike County which experienced an over 70 percent increase in electric rates initially.

Commissioner Tyrone Christy said the primary problem facing Pennsylvania was the way the PJM Interconnect sets prices in the wholesale electric market. He noted that if a company bought 10,000 megawatts and 1 MW was from natural gas sources and 9,999 from much cheaper coal-fired power plants, the price paid by companies would be based on the natural gas price.

Commissioners Jim Cawley and Kim Pizzingrilli also presented comments.

Irwin “Sonny” Popowsky, Consumer Advocate of Pennsylvania, again urged the Senate to adopt a least cost standard for utilities as they build a portfolio of electric suppliers with short and long-term contracts.

William Lloyd, Small Business Advocate, supported the development of transition rules by the Public Utility Commission by rulemaking rather than by legislation, which, he said, would be less favorable to small businesses.

Morgan O’Brien, Duquesne Light, said Duquesne has been without rate caps for over five years and their residential and small business rates are lower today than they were 15 years ago, but made recommendations on changing the bill so the company could offer other rate options.

Paul Bonney, PECO Energy, said Pennsylvania’s competitive electric market has brought substantial benefits to the state, but rate caps cannot continue forever and expressed support for Senate Bill 1134.

Stephen Feld, FirstEnergy, Douglas Krall, PPL, Ray Valdes, Allegheny Power, Richard Hudson, Retail Energy Supply Association, and W.Scott Miller, Constellation Energy Resources also presented testimony to the Committee.

11/23/2007