The House Consumer Affairs Committee held a hearing this week on proposals by House Environmental Committee chair Rep. Bud George (D-Clearfield) and House Majority Whip Rep. Keith McCall (D-Carbon) that attempt to ease the transition to market-based electricity rates after the rate caps come off most of Pennsylvania in 2010.

The bills include House Bill 2200 (George-D-Clearfield) requiring utilities to adopt energy efficiency and demand-side management programs and House Bill 2201 (McCall-D-Carbon) amend Title 66 providing for a transition to market-based electric rates, requiring assistance to low-income customers and providing for advance payments of electric bills.

The Committee is set to consider voting on the bills on February 5.

The Committee heard comments from a variety of witnesses during the lengthy hearing including the Public Utility Commission, the Consumer and Small Business Advocates, electric generators and distributors, union representatives and an environmental group.

PUC Commissioner James Cawley said the Commission, which already has in place rate mitigation regulations, supports open, fair and transparent power procurement, promotes energy efficiency and demand-side management as well as consumer education electric market issues. Commissioner Cawley then outlined a series of amendments the PUC would like to see to the bills.

In response to questions, Commissioner Cawley said extending the existing rate caps “may seem appealing, but you can only defy gravity for so long” and an extension would make matters worse. Electric prices have been capped for 14 years as a result of the 1996 electric competition law in Pennsylvania.

Sonny Popowsky, PUC Consumer Advocate, said the bills pending before the Committee provide the kind of legislative framework that is needed by Pennsylvania electric consumers.

William Lloyd, Small Business Advocate, said he is concerned that having the General Assembly make major changes to the PUC present mitigation strategy through legislation could result in rules that are less favorable to small business customers.

Doug Biden, President of the Electric Power Generation Association, said consumers in the Commonwealth will be best served by legislation supporting competitive markets and competitive procurement of electricity supplies and it would be a significant mistake to return to the past and authorize regulators to take charge of these fundamental choices.

J. Michael Love, President and CEO of the Energy Association of PA, said the overall direction of greater conservation and energy efficiency along with demand-side management is an essential path for Pennsylvania instead of relying on natural gas for the new electric generation.

Morgan O’Brien, Chairman and CEO of Duquesne Light, provided the Committee with the perspective of a company that has already gone through the transition to market-based electric rates. “Duquesne Light has been without rate caps for over five years, and our rates to residential and small business customers are lower today than they were fifteen years ago, and they will continue to be lower through the end of 2010, without any special legislation to aid in that transition or any need to phase in rate hikes to avoid price shock.”

Lisa Crutchfield, Senior Vice President, PECO Energy Company, said the legislation pending before the committee does not fully promote competitive markets or provide for full cost recovery, nor do the bills envision utilities providing energy-efficiency and demand-response programs to their customers and for these reasons her company is not supporting the legislation.

Other electric generators and distributors also provided comments on the bill, including: Stephen Feld, Associate General Counsel FirstEnergy, Doug Krall, PPL Electric Utilities, Aldie Warnock, Vice President at Allegheny Energy, Richard Hudson, Strategic Energy, Daniel Allegretti, Constellation Energy Resources and Mark Baird, Reliant Energy, Inc.

Carl Wood, Utility Workers Union of America, and Paul Simon, International Representative of IBEW, both warned of the dangers of unreasonable rate increases and supported the legislation.

John Hanger, President and CEO of PennFuture, urged the Committee to pass both of the bills as soon as possible saying the expiration of rate caps will boost electric prices between 20 and 50 percent and consumers need energy conservation programs and other tools to reduce their electric bills. He noted this expected increase in rates is still below the price increases that occurred with natural gas over the last 14 years.

Rep. Joe Preston (D-Allegheny) serves as Majority Chair of the Committee and Rep. Bob Godshall (R-Montgomery) serves as Minority Chair.

2/1/2008