PPL: Rate Cap Extensions Will Harm Reliability, Customers

ALLENTOWN, Pa., Feb. 12 /PRNewswire-FirstCall/ -- A bill that was the subject of hearings Tuesday (2/12) in the Pennsylvania House of Representatives has the potential to undermine the reliability of the state's electricity delivery system, PPL Electric Utilities' top executive said.

"Passage of this bill, which would extend artificial price controls on electricity, would result in financial instability for Pennsylvania's electricity delivery companies, threatening reliability for customers," said David G. DeCampli, president of PPL Electric Utilities. "While this extension of price caps may be perceived as politically expedient, it simply will postpone inevitable price increases for customers while threatening a California-type electricity crisis in the commonwealth."

Pennsylvania's House Environmental Resources and Energy Committee held a hearing Tuesday on a bill that would further extend electricity generation price caps, which have been in place for a decade. DeCampli said the bill is bad public policy and would illegally prohibit PPL Electric Utilities from passing along to customers the cost of electricity it purchases on their behalf.

Under Pennsylvania law, PPL Electric Utilities is required to purchase electricity for its customers who do not select another company to provide their electricity supply. Also under the law, PPL Electric Utilities passes along the price of that electricity supply, with no profit, to customers.

"Passage of this legislation would mean the state is reneging on an agreement it made with PPL Electric Utilities more than a decade ago," said DeCampli. "In addition to putting PPL Electric Utilities and other companies in serious financial jeopardy, it sends the signal that Pennsylvania cannot be trusted to live up to its commitments to the state's businesses. The message sent by legislators supporting this bill clearly is at odds with the state's desire to attract new businesses and the jobs that they provide.

"This punitive legislation is particularly disappointing because PPL Electric Utilities has kept up its end of the bargain for 10 years, capping our generation rates," said DeCampli. "Six other electric delivery companies in the state have been permitted to remove their rate caps as scheduled. To now prohibit rate cap expiration for the remaining five, who originally agreed to even longer price controls, is particularly unjust.

"The financial distress caused by this legislation will severely limit the ability of the state's electricity delivery companies to deploy demand- reduction programs, including smart meter technology," said DeCampli.

He said the bill also could discourage the development of badly needed power plants in the state as well as renewable energy initiatives.

DeCampli said PPL Electric Utilities would be forced to drastically cut costs if rate caps are extended because it would lose $100 million a month as a result of not being able to pass along power-purchase costs to customers.

"This bill would result in a less reliable electricity system because we would be forced to cut maintenance efforts and lay off employees," said DeCampli. "In a relatively short period, it would result in bankruptcy for PPL Electric Utilities.

"We understand that the expected one-time price increases can be a problem for our customers, and we support a reasonable approach to phase in higher electricity prices when generation price caps expire," he said. "In fact, we took the initiative to propose a voluntary five-year phase-in program that is pending before the Pennsylvania Public Utility Commission right now. And, we are offering customers programs to help them better manage their energy use."

DeCampli said the discussion of rate cap extensions will have a detrimental effect on prices for electricity in 2010. "As a result of this bill, electricity suppliers will view Pennsylvania as a more risky place to do business. Thus, by discussing rate cap extensions, the legislature already has harmed the very consumers it is attempting to help," he said.

PPL Electric Utilities Corporation, a subsidiary of PPL Corporation that provides electricity delivery services to about 1.4 million customers in Pennsylvania, has consistently ranked among the best companies for customer service in the United States. More information is available at http://www.pplelectric.com/.