Posted on Fri, Oct. 3, 2008

PhillyDeals: Peco meets with Rendell to talk rate hikes

Peco Energy Co. says it and other utilities have been meeting with Gov. Rendell and legislators in Harrisburg to negotiate ways to boost electric rates. Rendell wants "to take action before the current legislative session ends" next week, Peco said in a filing with the Securities and Exchange Commission.

Peco filed this lobbying disclosure in response to a story by Peter de Coursey of, a pay-for-news service, which detailed several legislative alternatives, all of which would mean higher electric prices for consumers.

According to Capitolwire, "the latest proposal" would phase in higher rates over four years, boosting Pennsylvanians' utility payments $2 billion in the first year and $11 billion over five years.

 "There is a good chance that a solution can be reached that would be acceptable to Peco," the company added. Rendell is hopeful the increases will be phased and manageable, said spokesman Chuck Ardo.

Rendell's in a hurry because electric-rate caps from the 1990s expire soon, and utilities want to cover their higher costs. Legislators know that if rates rise too fast, voters will be furious; not enough, and utilities may appeal to regulators or courts for payback.

"Rendell ignored this problem for years. Now he's getting out front on it and trying to arrange a deal where unjustified rate increases will be phased in, so he can claim he saved ratepayers from a shock," said David Hughes, executive director of Citizen Power, a Pittsburgh nonprofit organization. ("Rendell's been talking about energy for quite a while," Ardo said.)

Hughes said big increases weren't fair because power companies are profitable. And he cites federal Department of Energy data that show the state's generators produce nearly one-third more power than state residents and businesses use, on average.

What credit freeze?

In normal times, it costs more to sell stock than to borrow money because stock is more volatile and shareholders expect a higher return, said Scott Hastings, equity analyst at Delaware Investments, of Philadelphia.

But, he said, "in the current environment, debt has become scarce, and lenders are being much more cautious, so the cost to borrow has increased significantly."

Some companies turned off by the high price of credit are selling stock. Liberty Property Trust, of Malvern, said it would raise about $150 million by selling 4.8 million new shares.

The stock dropped 8 percent on that news, but at least four other real estate investment trusts have sold shares in the last week; big companies such as General Electric Co. are also offering shares.

Even the credit markets aren't closed for companies with blue-chip customers. PRWT Services Inc., a Philadelphia company that does customer service for government agencies and recently took over a Merck & Co. Inc. drug plant, says it raised $53 million from Structured Growth Capital Inc., of Jenkintown, on Wednesday. The cost to PRWT: less than 10 percent, said managing partner Barry Edelstein.

Structured has raised $3 billion from public companies, pension funds, and other investors it wouldn't name to finance clients since 2005, said Edelstein, a former Comcast Corp. executive and small tech company chief executive officer. It's owned by NDH Capital Corp., of Purchase, N.Y.

PRWT used to fund operations from bank lines of credit and preferred-stock sales. But vice chairman Jerry Johnson (he knew Edelstein from their Main Line neighborhood) says he has no plans to go back to banks. Structured "is not intrusive," Johnson said. "They let us run our business."

Separately, Puricore Inc., a Malvern company that makes the Sterilox food-handling safety system for supermarkets, said Wednesday it borrowed $9.74 million from Commerce Commercial Leasing, of Cherry Hill, at 7.7 percent.

"The credit markets are tight," said chief financial officer Keith Goldan. "But we have a strong business. And we have strong collateral," including the sterilizing machines that back the loans, and the revenue from supermarket leases.