Territories: Pennsylvania

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Pennsylvania Deregulation

The State of Pennsylvania as a whole is a tremendous user of power in the United States. In 1997, the Pennsylvania General Assembly passed the Electric Competition Act, which unbundled the delivery portion and generation portion of purchasing electric. The Act aimed to:

  • Encourage competition
  • Reduce overall costs
  • Increase the efficiency of the system

Transitioning to a Deregulated Market

Each Pennsylvania electric utility, working with the Pennsylvania Public Utility Commission and the State, capped electric prices at 1996 levels. The existing utilities were allowed to recoup "stranded costs", which were infrastructure investments made before the Electric Competition Act which would be unrecoverable in a competitive power market.

Through much litigation, all utility rate caps were required to expire by January 1, 2011, at which point generation rates would rise to meet the actual cost of generating the electricity. Each utility company scheduled their rate caps to expire at different dates shown here:

Utility Company Rate Cap Status % of PA Ratepayers
Citizens Electric Co. Expired 0.1
Duquesne Light Co. Expired 10.6
Pennsylvania Power Co. Expired 2.8
Pike County Light & Power Co. Expired 0.1
UGI Utilities Inc. Expired 1.1
Wellsboro Electric Co. Expired 0.1
PPL Electric Utilities Inc. Expired 24.6
Metropolitan-Edison Co. Dec. 31, 2010 9.5
Pennsylvania Electric Co. Dec. 31, 2010 10.6
PECO Energy Co. Dec. 31, 2010 27.8
West Penn Power Co. Dec. 31, 2010 12.7

Rates After Deregulation

Each utility has a different rate structure for customers continuing to purchase through the utility. Depending on the size of the customer, some utilities are offering a transitional one year fixed price for the period immediately after the generation rate caps expire. Other utilities are transitioning directly to monthly index pricing, where the customer bears the complete volatility of the market each month. In almost all situations, customers can achieve substantial savings and price stability by purchasing through a competitive supplier other than the local utility.

For the largest users in all utilities, they will be forced onto a time of day or hourly pricing structure. Hourly pricing means that for each kilowatt-hour of electric used, the customer pays the actual cost to generate electric that particular hour. Customers in this class can implement hedges (fixed prices) for part or all of their load, resulting in:

  • Price stability
  • Budgeting capabilities
  • Long-term savings at today's market levels
 
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