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Electricity Rate Caps Are Expiring

Posted: June 23, 2010

Rate caps that have kept the price of electricity relatively low are expiring in 2010 and 2011. Depending on which utility company provides your electricity, your rate cap protection may have already expired.

Rate caps that have kept the price of electricity relatively low are expiring in 2010 and 2011. Depending on which utility company provides your electricity, your rate cap protection may have already expired. But the rate caps still are in effect for the large utility companies in Pennsylvania until December 31, 2009, for PPL and December 31, 2010, for Allegheny Power, Met Ed, Penelec, and Philadelphia Electric (PECO).

Rate caps on the price of electricity have been in effect throughout the state (with the exception of the areas served by the rural electric cooperatives and municipal-operated utilities) since late in 1996 when the deregulation of electricity generation was approved. These rate caps--enforced by the PA Public Utility Commission--provide price protection to consumers.The utility companies were protected as well by the tangible and intangible transition fees (also known as stranded investment fees) that were charged to consumers on each monthly billing statement. 

The bottom line is that consumers have experienced no more than nominal annual price increases in electricity (5 percent or less) since 1996. These small increases have been occurring at the same time that prices for oil, natural gas, propane, coal, and even firewood have skyrocketed.

No one knows for sure what will happen when the rate caps expire. Price increases are anticipated. In neighboring states of Maryland and Delaware, prices for electricity rose by about 70 percent and 50 percent, respectively, when their rate caps expired. In Maine, the increase was about 100 percent. However, Pennsylvania is the number 1 state in terms of the net export of generated electricity. As a result, maybe the rate increases will not be as large in the Commonwealth as in some other states. 

We all know that a dramatic price increase in electricity will have a profound impact on every person and every business in the state. To prepare for higher electricity prices, customers are encouraged to:

  • Use electricity in a more efficient manner.
  • Establish dual- or triple-fuel flexibility.
  • For commercial and industrial customers, manage kW demand for electricity and natural gas to avoid spikes in demand.
  • Evaluate the feasibility of energy alternatives.
  • Keep accurate, up-to-date, easily accessible records of your energy use.

We must always remember that the cheapest energy is always the energy that you do not use because of an effective energy-management program.