Power rate surges haven't hit here just yet

By Rick Stouffer

Sunday, April 22, 2007

The huge price increases power customers in Illinois are experiencing haven't hit the Pittsburgh market, but have come close.

Within Duquesne Light Co.'s service territory of Allegheny and portions of Beaver counties, rate caps expired in 2002, but residential electricity prices are lower than they were prior to deregulation in 1996.

"The cost of contracts entered into by Duquesne (to buy power) in the wholesale market and passed on to residential customers is still less than the cost of generation that had been included in its regulated rates prior to restructuring," said Irwin "Sonny" Popowsky, Pennsylvania's Consumer Advocate. "We need strong wholesale markets for restructuring to work."

Duquesne Light sold off its own generating plants several years ago as part of its restructuring required by deregulation.

"If you look at Duquesne Light's rates now, they are 15 percent lower than that their 1996 levels," said Richard Hudson, marketing manager for regulatory affairs at energy marketing company Strategic Energy in Pittsburgh.

Electricity is the only energy product measured in inflation-adjusted dollars that has experienced a price drop, said John Hanger, a former commissioner with the state Public Utility Commission and now CEO of Harrisburg-based environmental watchdog group PennFuture.

"Why lower prices? Because much more efficiency has been brought into the system," Hanger said. "In the old days, power plant owners were paid whether their plants were running or not. Today, if a plant isn't running, the owner isn't making any money."

Not every utility customer has fared as well as Duquesne Light's. Some 160,000 customers of FirstEnergy Corp.'s Penn Power subsidiary, whose territory extends from Cranberry northward and covers 1,100 square miles, saw rate caps expire on Jan. 1. Power price since then have jumped 50 percent and more.

"Once price caps come off, price gouging becomes legal," said David Hughes, executive director of consumer advocacy group Citizens Power, Pittsburgh.

Early in 2006, in Northeastern Pennsylvania's Pike County, the 4,500 customers of Pike County Light & Power each saw their electric bills skyrocket -- some as much as 130 percent.

Deregulation proponents say the tiny utility did everything wrong when buying power for its customers, most damaging of which was going into the marketplace to buy electricity in August 2005 -- right after Hurricane Katrina hit the Gulf Coast and crippled the nation's energy industry.

Allegheny Energy Inc.'s Allegheny Power unit has extended rate caps in exchange for small, annual increases. Between 2006 and 2010, the typical Allegheny Power residential customer using 1,000 kilowatts of power monthly will see his or her bill climb to an average of $90.91 from $71.29.

Concerned about the potential jump to market rates that utilities around the state could begin charging in 2010, the state PUC has convened meetings with concerned parties to figure out how to soften the potential blow.

Thus far, the only thing agreed upon was that the public needs more education about the situation, said Citizens Power's Hughes.

"And the governor's energy plan that he introduced a few months back completely ignores power price increases," Hughes said. "He completely ignored the elephant in the room."

Rick Stouffer can be reached at rstouffer@tribweb.com or 412-320-7853.

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