CITIZEN POWER

Public Policy Research Education and Advocacy

 

 

STATEMENT ON THE ECONOMIC IMPACT

OF ELECTRIC RESTRUCTURING

February 3, 1998

 

Citizen Power, Inc. is a Pittsburgh based, public policy research, education and advocacy organization. We have been devoting all of our resources to the electric restructuring issue, because we recognize the potential impact retail competition can have on our regionís economy and environment. This so called ďMother of all DeregulationĒ represents a historic change-and opportunity-for western Pennsylvania. The electric industry is the biggest business in the United States, and a $12 billion industry in Pennsylvania. The potential savings for business and resi-dential consumers are significant, and for example, exceed by several times the economic bene-fits attributedto the Regional Renaissance Initiative.The forthcoming PUC decisions regarding the DQE/APS restructuring and merger proposals are critical to our regionís future economic competitiveness.

 

We believe three crucial goals should guide the PA Public Utility Commissionís (PUC) consideration of the Duquesne Light (DQE) and Allegheny Power (APS) merger and restruct-uring proposals:

 

        Development of a fully competitive retail market for electricity

        Assurance of a safe, clean, affordable and reliable power supply

        Lowest possible electric prices for western Pennsylvania consumers

 

Today, Citizen Power is pleased to bring together:the Building Owners and Managers Associa-tion, the SMC Business Councils, the International Mass Retailers Association, the Greater Pittsburgh Hotel Association, Citizens for a Sound Economy, the United Homeowners Association, and the Allegheny Institute for Public Policy, to share their concerns about this important development.

 

On August 1, DQE and APS submitted their restructuring and merger plans to the PUC, thus initiating a process that is approaching its final phase. Rather than reducing consumer costs, the DQE/APS restructuring and merger plans would maintain current, high price levels for western Pennsylvania until the year 2005. This result would deny western Pennsylvania businesses and homeowners the substantial savings intended under the 1966 Electric Generation Customer Choice and Competition Act.

 

Furthermore, as described in the attached October 20, 1996 Pittsburgh Post Gazette article, Duquesne Lightís current high rates-42% above the national residential average-have been and continue to be a substantial drag on our regionís competitiveness.In contrast, with forecasts of initial savings of 15-20%, the implementation of retail competition next year would be a power-ful and lasting economic growth stimulus.

 

Approval of the proposed merger and restructuring of DQE and APS should hinge on whether the plans will help to reach the above goals. Unfortunately, as part of the merger/ restructuring, the two utilities are seeking to saddle customers with $4 billion in so called stranded costs.Most of DQEís stranded costs are the result of $9 billion in construction cost overruns at the Companyís Perry 1 and Beaver Valley 2 nuclear plants. We believe it is unjustifiable to maintain current high electricity prices in order to make up these decades-old construction cost overruns.Consumers must be able to keep the money they will save by choosing the lowest cost power supplierónot have those savings taken away by the two utility companies through offsettingsurcharges.

 

We want to see a level playing field, where residential and small business customers have an equal opportunity to participate in the new competitive electric market place. However,real competition will require real leadership. Accordingly, we urge the Governor and the PUC to do what is necessary to insure that all electric customers realize the promised benefits of compet-ition.

 

Representatives of each of the aforementioned organizations are here today to speak about their vision of how robust electric competition can become a reality in Pennsylvania:

John Java†††††††††††††††††††† Building Owners and Managers Association

Wayne Brough Citizens for a Sound Economy

Albert/Jordan Clark††††† United Homeowners Asscociation

Jennie Keehan††††††††††††† International Mass Retailers Association

Jake Haulk†††††††††††††††††† Allegheny Institute of Public Policy

Cliff Shannon††††††††††††††† SMC Business Councils

Joe Kane††††††††††††††††††††† Greater Pittsburgh Hotel Associaton (submitted statement)