HARRISBURG, Pa., Feb. 12, 2008 (PRIME NEWSWIRE) -- Letting competition evolve in Pennsylvania is vital to all electric customers. Extending rate caps will only delay dealing with the realities of a global electric market, force utilities to buy power at prices much higher than the prices at which they are allowed to resell it to their customers, and ultimately not protect the Pennsylvania consumer from higher rates.
We have learned valuable lessons from the deregulation experience in California. When policy makers in that state attempted to extend retail electricity rate caps during 2000/2001, the strategy failed. The extension of retail rate caps ultimately contributed to electricity reliability problems, the bankruptcy and near bankruptcy of the state's two largest utilities, even higher electricity prices for consumers, and the public's loss of confidence in the state's governor.
Renowned industry experts like Susan Tierney, Ph.D., a former state and federal regulator, agree that extending rate caps would be detrimental to electric utilities, the consumer and the Pennsylvania economy.
Tierney points to the fact that the realities in today's global energy markets make it unlikely that low electricity prices will prevail in the future, in Pennsylvania or anywhere in the U.S. The commonwealth must avoid the situation of having to buy high and sell low. This situation would be disastrous for electric utilities because sellers of power would either be reluctant to sell power to the utilities at all (for fear of not being paid), or at a minimum would add a substantial premium to the price of their power in order to cover this risk of non-payment. These risk premiums would ultimately be reflected in the customer's bill.
A statement by Susan Tierney regarding rate caps is available at http://media.primezone.com/cache/9728/file/5240.pdf
Electricity prices must reflect the actual costs of power, and over the past decade, those costs have risen substantially. Although there are transitional challenges ahead for the legislature and consumers, it is most beneficial for everyone if we continue to embrace a fully competitive electric market in Pennsylvania.
In order to complete the transition to full competition, electric utility companies are supporting: rate plans to phase-in price increases over time; the use of conservation and demand-response programs and advanced technology to help consumers conserve energy and save money; and targeted financial assistance or rate-relief packages for customers with low and fixed incomes. By continuing to take advantage of competitive purchasing of power, utilities will be better able to keep prices low for all Pennsylvanians.
The Energy Association represents the interests of the Commonwealth's PUC-regulated electric and natural gas energy distribution companies. Member companies provide reliable electric and gas service to over 8.2 million customers in Pennsylvania.