PUC Electric Price Comparison Report Shows Drop In Market-Based Electric Costs
The Public Utility Commission this week released another in its series of reports comparing current market prices for electricity with capped prices paid by consumers. The new figures reflect significantly lower market prices than those released last August.
For example, prices comparisons for residential rates based on December 20, 2008 electricity prices show that market-based rates would be 1 percent higher in PECO service territory, 22.8 percent higher in PPL territory, 29.3 percent higher in Penelec territory, 36 percent higher in West Penn service area and 36.9 percent higher in Med Ed territory.
The Commission notes that lower market prices could translate into smaller percentage increases for customers if rate caps were to expire today. While this trend is a positive development, the Commission emphasizes that market prices are subject to constant change and that there are no guarantees that the market prices will continue to fall.The prices may stabilize or trend upward in the future.
The Public Utility Commission said in its report it will not be complacent about continuing its actions to mitigate potential rate increases. For customers, energy conservation and efficiency are still recommended long-term strategies that should provide benefits regardless of where market prices trend in the future.
Despite recent declines in energy prices, Gov. Rendell cautioned a group of mid-state business executives that energy prices will inevitably increase again, making now the ideal time to invest in energy conservation and renewable technologies.
“The prices of fossil fuels have fallen significantly over the last six months, but now is not the time to become complacent and fall back into wasteful habits,” Gov. Rendell said. “Demand for energy will rebound, but the rate of new discoveries of easily obtained, high-quality oil will not be able to match it. Prices will increase again, so we must make ourselves ready.”
The Governor said that many businesses and residential consumers in Pennsylvania can expect double-digit electricity rate hikes and volatile market prices once rate caps expire statewide in 2011. That reality, in addition to the unpredictability of future gas prices, should motivate consumers to invest in cleaner, money-saving alternative and renewable energy technologies, as well as conservation and efficiency measures. (Read the Governor's full statement.)
Wayne Williams, Ph.D., Director of the PUC Bureau of Conservation, Economics & Energy Planning, said the calculations estimate the increases consumers would see, on average, if rate caps expired today and the state's five electric distribution companies (Metropolitan Edison Company, PECO Energy Co., Pennsylvania Electric Co., PPL Electric Utilities Corp. and West Penn Power Co.) still under caps immediately began charging prices based on current short-term market conditions.
The market price of electricity is very volatile and changes on a daily basis, and is subject to large swings based on the price of fuels in the wholesale energy markets, over which the PUC does not have jurisdiction.
Director Williams noted that these estimates identify current market prices in the short term, in comparison with capped rates, and do not in any way represent a Commission projection of future prices when the remaining rate caps expire. The Commission anticipates that actual post-rate cap prices for each distribution utility will reflect a portfolio of resources, obtained over time, which will mitigate the effect of monthly and daily changes in the market rates for energy.
A majority of electricity customers currently pay rates under caps, which are set to expire over the next couple of years consistent with the implementation of the state's electric competition law. Customers in service territories where rate caps have already expired have had varying experiences, with some experiencing increases. The PUC will use the estimates released today as part of ongoing efforts to educate customers.
The PUC also has promoted energy efficiency and demand side response; required electric utilities to educate their customers about rising energy prices and the resources to help them such as energy conservation, low-income programs and shopping for electricity supply; increased its involvement at the federal level where wholesale energy prices are set; sought to remove barriers to competition; and proposed a statewide consumer-education campaign. The Commission also developed default service regulations and policy statements that should help mitigate the volatility and increases in future market prices for electricity.
For more information, visit the PUC's Electric Price Estimates webpage.
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