Proposal: No GPU increase 'til 2006
Eagle/Times Under the proposed
agreement, GPU and Akron, Ohio-based FirstEnergy Corp., which is planning
to acquire GPU, would not be able to seek a rate increase for Pennsylvania
customers until that year at the earliest, and only under certain
circumstances. Also, electricity rates
would remain frozen at 1997 levels until the end of 2010, slightly longer
than called for in GPU's current agreement. However, the proposed
agreement would allow Pennsylvania subsidiaries of GPU Energy to recoup
from ratepayers some or all of the difference between its costs for buying
power and what it can charge customers. The proposal came out
of negotiations among GPU, FirstEnergy and various consumer, industry and
interest groups. The negotiations were
ordered late last month by the PUC, which approved the $123 billion
acquisition but told the utilities and the other parties to seek a
consensus regarding the rate-increase request by today. The PUC is scheduled to
vote on the matter Thursday. A spokesman for the PUC
said the commission would have no comment on the proposal until it had
studied it more thoroughly. But Jeff Dennard,
spokesman for Morristown, N.J.-based GPU, said, “We think it is a good
settlement for all parties, and we're hopeful the PUC will approve it.” But a consensus was not
reached. Reportedly several parties to the negotiations did not sign the
agreement. Among them was Citizen
Power, a Pittsburgh-based consumer group, whose executive director, David
Hughes, blasted the proposed settlement. “If this is approved,
it will be a major increase in costs over time to GPU ratepayers,” Hughes
said. “It's disingenuous to claim there's no rate increase.” Hughes charged that the
increased costs to ratepayers are hidden in the settlement. The settlement would
allow GPU to place its wholesale power losses in a deferral account through
2005, and keep those losses on the books until 2010. Future wholesale power
profits then would be credited against the losses, and the company would
write off any remaining losses in 2010. However, if the
acquisition does not take place, GPU then can return to the PUC to seek
rate relief, though its losses from Jan. 1 through May 31 would have to be
absorbed. Under electricity
restructuring in Pennsylvania, GPU is required to supply power to its
customers as a provider of last resort, but its costs on the open market
for the power have risen dramatically. The firm applied to the
PUC for relief, stating that it would lose as much as $316 million under
the terms of the provision. However, Irwin “Sonny”
Popowsky, Pennsylvania Consumer Advocate, was a party to the agreement and
said it should be viewed by ratepayers as a relief. “(A rate hike) would
have opened up the door to all sorts of rate-cap exceptions around the
state,” Popowsky said. He also said the
acquisition of GPU by FirstEnergy provides the firm with
electric-generation backup. “They will not be able
to use as an excuse that they have no generation and are subject to the
whims of the wholesale market,” he said. “Whatever is not collected by
2010, they write off or eat.” GPU also faces a Friday
deadline imposed by its bankers to obtain some kind of agreement acceptable
to the PUC that would stabilize the company's cash flow and debt level. If
GPU is unable to meet the deadline, it could be forced to suspend its
dividend and forfeit about $720 million in collateral. The Associated Press
contributed to this article. You can contact Tony Lucia at 610-371-5046 or [email protected]. |