The Public Utility Commission this week approved a new default service plan for Pennsylvania Power Company that will transition customers to market-based electric rates in its service territory.

The Commission voted 3-1 to approve a plan that provides customers with reasonable default service rates and removes certain barriers to competition for each of the major customer groups. Several parties participated, including the company, consumer advocate groups and multiple electric generation suppliers.

Under the plan, Penn Power will rely on the competitive wholesale market for one and two year purchases of energy to obtain power for the company's default service customers. The new generation rates will be effective from June 1, 2008, to May 31, 2011.

On December 20, 2007, the Commission approved all aspects of an original settlement, except the procurement approach for residential customers. The Commission remanded the case to the Office of Administrative Law Judge and directed parties to consider a portfolio approach for residential customers. Upon review of the certified record that resulted from remand, the Commission approved the procurement approach presented in the original settlement for residential customers.

Commission Chairman Wendell F. Holland noted in a statement that while Penn Power's Default Service Program is operating, "all parties can continue to monitor the markets and gather data to determine whether a portfolio approach with a substantial spot market position would operate as well as the more conservative approach."

In a statement, Commission Vice Chairman James H. Cawley said, "the parties have been especially helpful in shedding light on how we balance the sometimes conflicting goals of ensuring reasonable default service rates for consumers, while removing barriers to further development of true competition among energy providers."

In a dissenting statement, Commissioner Tyrone J. Christy said, "considering the circumstances of this proceeding, adoption of the inflexible full requirements approach will result in excessive premiums to ensure price certainty and will close the door to the participation of several suppliers."

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 default service or provider of last resort service.

The default service prices for electric generation service are required to reflect "prevailing market prices," according to the law. Customers do have the right to choose an electric generation supplier other than Penn Power.

The generation rates for the state's electric customers were capped as a result of the settlement agreements reached during the state restructuring proceedings. Electric generation prices are not set by the PUC, but rather are set by the wholesale market, over which the PUC has no jurisdiction. Penn Power's caps expired December 31, 2006. The existing default service plan for the company expires June 1, 2008.

NewsClip: PUC Judge Gives Nod to PPL Rate Transition Plan

3/14/2008