PPL Electric Utilities offers strategy for completing transition to competitive markets in Pennsylvania

Harrisburg, PA, June 26, 2006 — PPL Electric Utilities recommended a long-term strategy for completing a smooth transition to competitive electricity markets in Pennsylvania while achieving the best deals available for the state’s electricity users.

In testimony before the Pennsylvania Public Utility Commission, the company recommended that Pennsylvania establish a tightly structured, state-run process for procuring electricity supply for customers who do not select an alternative supplier in 2011 and beyond. Other companies and organizations also gave recommendations to the commission (see article).

In cases where customers do not choose a supplier, utilities are required to purchase electricity on behalf of those customers as the “provider of last resort” (POLR).

In its comments and testimony, the company recommended a staggered approach to procuring electricity in the state. Under its proposal, all utilities in the state would follow a common procurement schedule and standardized process. Portions of utilities’ POLR supply needs for 2011 would be procured in 2008, 2009 and 2010.

The state ultimately would move to annual procurements in which utilities would obtain one-third of their POLR electricity supply needs for each of the next three years. In 2014, for example, utilities would procure one-third of their POLR supply needs for 2015, 2016 and 2017.

By beginning to acquire POLR supply well in advance of when it is needed, utilities and consumers will be able to get an earlier sense of how rates may change in coming years, the company said.

In addition to proposing a statewide process for utilities to use in procuring POLR electricity supply for 2011 and beyond, the company announced that it will formally propose its own procurement strategy for securing POLR electricity supply for 2010. This PPL-specific approach will be filed with the commission on July 31. The strategy would meet the company’s POLR supply needs until the proposed common schedule starts for all utilities in 2011.

Capped POLR rates expire for most Pennsylvania utilities at the end of 2010. However, they expire for PPL Electric Utilities at the end of 2009. These caps apply to the cost of electricity supplied to customers who do not choose an alternative supplier. The costs appear as generation charges on monthly bills. They were established during the deregulation of electricity generation in the late 1990s to ease the transition to competitive generation markets.

As envisioned currently, PPL Electric Utilities likely would procure portions of its 2010 POLR supply needs in each of three subsequent years — 2007, 2008 and 2009, said Doug Krall, manager of Regulatory Strategy for PPL Electric Utilities.

Krall, who represented PPL at the PUC’s hearing, said the company also will propose time-of-use rates that would enable customers to save money by using electricity during off-peak times, when demand is less.

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