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Engineers & Consultants


Electric Energy Rate Caps in Pennsylvania

Most Pennsylvania commercial and industrial electric users currently are paying electric rates that are artificially low due to the imposition of rate caps in 1997.  The rate caps had two components:  distribution/transmission and generation.  The distribution portion of the caps fully expired in 2007.  The generation portions still in effect are due to expire at the end of 2009 for customers served by PPL Electric Utilities, Inc. and at the end of 2010 for customers served by Metropolitan Edison, West Penn Power, Pennsylvania Electric Company and PECO Energy Company.  As a result most electric users will see the true cost of electric energy for the first time in several years.  Moreover, in 2004, Pennsylvania Governor Rendell signed the Alternative Energy Portfolio Standards Act which is triggered by the expiration of the rate caps.  This Act requires Electric Distribution Companies (EDCís) to increase their resale of electricity generated from alternative sources such as wind, photovoltaic, biomass, waste coal, and hydroelectric.  Since alternative fuel sources have historically been more expensive than fossil fuels or nuclear, this Act will put further upward pressure on energy costs.

The Pennsylvania Electric Competition Act went into effect in January 1997.  The purpose of the Act was to bring competition to the generation portion of electric energy supply by establishing a framework to provide ratepayers access to multiple providers of electric generation.  Full implementation was phased in over a three year period thru the imposition of rate caps on the generation and distribution portions and of the electric charge.  Key provisions of the Act included: reliability; licensing of alternative suppliers of energy; rate caps; stranded cost recovery; and quality of service.  Each of the electric utilities operating in the State of Pennsylvania was required to submit a restructuring plan that addressed stranded costs, unbundled prices, and customer access to alternative generation suppliers. 

Electric customers that choose not to source generation from an alternative supplier with expiration of the rate caps will be provided energy from a Default Service Provider which will be their EDC or incumbent utility.  The EDC will acquire electricity on behalf of those customers at prevailing market prices and will recover reasonable costs from the customer. 

Energy costs have been volatile over the past few years.  Other jurisdictions have invoked various methods to mitigate the volatility in energy markets.  These methods have included averaging purchasing over a multi-year basis, or frequent adjustment of rates in response to market swings.

Clearly, electric energy procurement is becoming more complicated and the energy cost trend is upward.  Brice Associates can offer a variety of strategies to manage energy costs including: energy use analysis, energy auditing, economic demand response, interruptible load programs, procurement in the deregulated markets, sub-metering, and utility billing services among others.  For most organizations energy represents a significant portion of annual expenditure; donít leave such a critical commodity to chance.  Put professionals in your corner to assist in your energy management efforts.



© 2004 Brice Associates, LLC                                                                                                     Updated: December 2010