From the Central Penn Business Journal, two views on electric utility industry restructuring in Pennsylvania:
First from Matt Brouillette:
Pennsylvania’s electricity rate caps have kept prices artificially low, preventing competitors from entering the marketplace and consumers from having choices. Now, when rate caps expire in 2010 in PPL territory, most of central Pennsylvania will see an increase in electricity prices.
… Rate caps expired in western Pennsylvania years ago, and today 20 percent of Duquesne Light customers have switched to other suppliers. The competition has forced Duquesne Light to offer more competitive prices and better services. The result: Electricity consumers are benefiting.
… Competition forces companies to serve their customers with the best prices and service, giving consumers more control. While it’s true that electricity prices in both monopoly structures and competitive markets have escalated over recent years, that is due to rising costs for generating fuels, not deregulation. Moreover, prices already have begun to drop in competitive markets — an effect not seen in monopoly delivery systems.
Case in point is PPL’s recent announcement of a 30 percent rate hike this January. … A number of companies already have announced their intention to compete for PPL customers, with one, Dominion Retail, guaranteeing a savings of 10 percent on PPL’s rates for the first 5,000 customers.
Rejoinder from Eric Epstein:
Gov. Tom Ridge predicted that electric competition would lead to job growth, economic expansion and decreased rates.
According to Ridge, “Pennsylvania’s national leadership in electric competition continues to bring dramatic savings and economic benefits to Pennsylvanians” (Aug. 4, 2000). The success of electric competition would shave business costs and give employers more money to invest, thereby creating multiplier effects on the state economy. “Competition” also would produce savings that would give consumers more money to spend.
… Could the deregulators have gotten it more wrong?
The reality is not so dreamy. Electric utilities are collecting $11.4 billion in stranded costs, increased taxes on ratepayers and dumped customers at record rates.
… Deregulation was a great bargain for PPL. Last year the company reported a profit of more than $1 billion on $6.5 billion in revenue and set records in consumer cruelty.
… A study published by Carnegie Mellon University’s Electricity Industry Center in 2008 found, “On average, power users in restructured states pay 2 to 3 cents per kilowatt hour more than customers in states that didn’t restructure.”
… Decide for yourself if electric deregulation has delivered on its bold promises or served as yet another corporate failure. But don’t take too long. PPL is set to jack up residential rates by 35 percent in 2010.
Brouillette is president and CEO of the Commonwealth Foundation; Epstein is chairman of Three Mile Island Alert Inc.