CITIZEN POWER

Public Policy Research Education and Advocacy 

F O R I M M E D I A T E R E L E A S E Contact: David Hughes

February 1, 2007 412/421-6072

Governor’s Energy Plan is a step forward, but fundamental flaws will preclude more cost savings, says Citizen Power

PITTSBURGH, February1/PRNewswire—According to a press release issued today, Governor Rendell has unveiled his “Energy Independence Strategy.” The governor’s plan’s “first priority” is to “save consumers $10 billion in energy costs over the next 10 years” by implementing new laws and regulations. To meet this goal, the plan calls for the use of ‘smart metering’ technology and long-term power contracts.

“While we commend the governor for proposing initiatives to address the many problems associated with energy use, we are disappointed that he failed to propose the fundamental structural changes required to produce real cost savings,” said David Hughes, executive director of Citizen Power, a regional energy advocacy organization.

“The governor talks about the need for ‘stable’ electricity prices and sees long term contracts as the solution to ‘wildly’ fluctuating electric generation rates. Long term contracts certainly will help, but the number one thing that has to happen is for the governor and the legislature to bring an end to the failed electricity deregulation experiment that has caused this rate instability,” said Hughes.

The deregulated electricity generation scheme got underway in 1999. Customers were

promised that competition would result in lower rates. After 8 years, a competitive market has yet to be established and rates are continuing to rise. “Once the rate caps come off across Pennsylvania in 2011, electricity suppliers will be able to charge whatever the market will bear. Since there is no competition, price gouging can happen and the state will have little authority to stop it,” Hughes said.

Citizen Power agrees with the governor that “[I]nvesting in conservation is critically important” and is looking forward to the details as to how the governor’s plan will bring about new conservation measures to reduce energy demand. However, Citizen Power has concerns about an over reliance on “smart” or “time of use” metering technology (also called “real time pricing”).

“The governor relies too heavily on real time pricing as a way of achieving a substantial portion of the $10 billion in savings,” said Hughes. “The claim that this will lower consumer bills should be viewed with considerable skepticism. At the very least, this technology has to be studied more to ensure that its use will not have adverse impacts. For example real time pricing can be used to shift costs from large users who can more easily interrupt their usage, to small users who have little ability to shift their usage to different times of the day or night. In addition, the conservation benefit is questionable. Shifting industrial production to night hours may reduce fuel consumption a little if more fuel efficient generating plants are run, but the real savings come from reducing the need for capacity,” Hughes concluded.

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