Electricity Deregulation Blog

Capital Domes Head to Head: A look at how electricity deregulation will affect Pennsylvania’s power prices

Brouillette: Choice and competition, not rate caps, keys to affordable electricity

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.

Of course, government-imposed price controls always distort the delivery of goods and services. So after the initial shock of paying rates closer to the going market price of electricity, Pennsylvanians will see an increase in competition — and with it, greater choice and better values. It is already happening in pockets of Pennsylvania.

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 benefitting.

Savings can be seen in other states that embraced competition and got rid of government price controls. Customers shopping for electricity in Maryland are paying close to 2 cents less per kilowatt-hour compared with those who stayed with their default service provider. In Massachusetts, competition saved customers $1.1 billion from 1998 through the end of 2004. Despite rising energy costs, the average rate of electricity offered in Texas’s restructured market is only 2.9 percent higher than the inflation-adjusted rate in 2001. The average Texan now can choose from among 28 providers, compared with only four in 2002.

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. That increase is largely the result of PPL’s decision to buy a significant amount of its energy supply last year when fuel costs were high. 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.

Delaying the expiration of rate caps would only inhibit economic growth from companies looking to invest in Pennsylvania. With rate caps still in place for more than 80 percent of Pennsylvania’s ratepayers, 44 companies already are licensed to be competitive generation electricity suppliers.

It’s time to end government price controls on electricity and allow Pennsylvanians to make choices once again in a competitive marketplace.

Epstein: Electric deregulation is the great failed experiment

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.

Ridge’s secretary of revenue, Robert A. Judge Sr., stated, “We expect electric competition will help create more than 36,000 jobs between 1998 and 2004, and have a major positive impact on our state’s economy. And millions of Pennsylvania families and employers continue to save money on their electric bills — without even lifting a finger.”

The Department of Revenue also reported to Ridge and the General Assembly that deregulation would result in greater sales tax and personal income tax collections.

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 shifted power plants back to the local tax rolls under the assumption that utilities would pay at least the same amount had they been subject to real estate taxes.

However, after PPL collected more than $2.86 billion in “stranded costs” for building ill-advised nuclear power plants, it claimed that its generating stations had depreciated overnight and were only worth a fraction of pre-deregulation estimates.

By 2004, homeowners were paying an average of 30 percent more in property taxes than they did in 1997. PPL and the other electric utility companies are paying 85 percent less in taxes on their plants, down from about $120 million annually to about $20 million, according to a Philadelphia Inquirer analysis.

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.

But it gets worse.

Chapter 14 — a law enacted in 2004 during a “lame duck session” of the legislature — made it easier for utilities to shut off service to consumers if they fell behind in their payments. In 2005, the first year of “energy reform,” Chapter 14 produced a 113 percent increase in terminations. In the first eight months of 2008, PPL cut electricity to 28,561 customers, a 111 percent increase from the same period in 2007. The statewide average is 24 percent.

Uncollectible accounts were supposed to go down with the price of electricity. The promise of deregulation leading to more capacity and more competition and lower prices have turned out to be a profitable illusion for a select few.

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.”

By contrast, the state Department of Revenue released a report in August 2000 — “Electricity Generation Customer Choice and Competition” — that guaranteed free market nirvana. It predicted:

• The real gross state product would be $1.9 billion higher;
• Overall employment would increase by 36,400 full-time and part-time jobs;
• Nominal personal income would increase by $1.4 billion;
• The price index would decrease by .47 percent; and
• The population would increase by 51,400 people as workers were attracted to job opportunities in Pennsylvania.

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.
•
Matt Brouillette is president and CEO of the Commonwealth Foundation, a conservative public policy think tank in Harrisburg. E-mail him at info@commonwealthfoundation.org. Eric Epstein is a watchdog and advocate for consumers, good government and safe energy. He is chairman of Three Mile Island Alert Inc., a safe-energy organization. E-mail him at lechabon@comcast.net.

By Eric Epstein and Matt Brouillette – Central Penn Business Journal

Technorati Tags: electricity deregulation Pennsylvania, energy deregulation Pennsylivania

PPL gets PUC OK – Utility is allowed to do billing and accounting for customers who switch service after caps.

 

The state Public Utility Commission voted unanimously on Thursday to allow PPL Electric Utilities to continue to do the billing and accounting for customers who switch their service when rate caps expire in January.

PPL’s rates are expected to increase about 30 percent when rate caps expire on Jan. 1, making offers from retailers who entering the market more competitive. Under deregulation, customers will be able to switch among retail suppliers, but PPL will continue to maintain local electric lines and bill customers.

Under the one-year program approved on Thursday, PPL would be allowed to buy the accounts receivable from the new electric retailers at a 1.37 percent discount, essentially continuing the processes it’s already doing but under contract with the retailer.

The decision reduces the duplication of services, PUC spokeswoman Jenn Kocher said, and PPL would receive a percentage of the customers’ payments.

Under the program, PPL would also have to allow budget billing options but retains the right to terminate customers for non-payment within the usual utility regulations. Retailers agreed to not reject residential customers based on credit-related issues or require a deposit for service.

In a statement issued with the decision, PUC Vice Chairman Tyrone Christy noted concerns that the plan gives no incentive to the retailer to ensure accounts are paid, therefore saddling customers who remain with PPL’s default service with the extra expense of uncollected accounts.

He indicated several questions that he hoped PPL would address throughout the year.

The program’s discount allows 1.32 percent for uncollectible accounts and .05 percent for administrative fees.

In a statement, the Retail Energy Supply Association, which was involved in the negotiations for the program, applauded the decision.

“This program will help ensure a level playing field for new suppliers and will provide customers with the convenience of receiving a single bill from PPL. Similar programs in other states with electric competition have proven very successful in promoting a more robust competitive market,” noted Richard Hudson Jr., the association’s Pennsylvania chairman.

By Rory Sweeney rsweeney@timesleader.com

Timesleader.com staff writer

Technorati Tags: electricity deregulation Pennsylvania

Residential customers can now seek best utility rate

Mike McLaughlin plans to see whether a different electric supplier can offer him cheaper electric rates at his home.

McLaughlin, chairman of the Adams County Board, saw a $13,684 decrease in electric charges for county buildings last year after switching electric suppliers. He expects an additional $28,000 in savings for the county this year.

So when asked whether he’ll seek cheaper electricity at home, McLaughlin did not hesitate.

“Absolutely. I mean, money’s money,” he said.

Changes that took effect in state law last month allow residential electric customers in Illinois to shop around for the best deal on electric rates. Businesses and institutional customers have had that option for several years.

Pete Pohlman, an energy consultant who worked 40 years for CIPS and AmerenCIPS, has worked with a number of local businesses and institutions doing energy audits and setting up contracts with electric retailers. Pohlman said energy choice has been popular for large commercial entities for several years. The small commercial market has gotten good in only the past year to 15 months.

Pohlman sees a similar surge in interest coming for residential customers.

Leigh Morris, a spokesman for Ameren Illinois Utilities, said a company Web site — www.IllinoisPowerSwitch.com — can help customers work through their options. Those who do not use the Internet can get help by calling (888) 789-2477.

“People need to know we’re neutral on this issue,” Morris said.

AmerenCIPS is an electric distribution company. It owns power poles, power lines and substations, and operates the entire support network, such as billing and repair services.

“We’re still the ones to call if a storm takes down the poles in your neighborhood,” Morris said. “The customers’ relationship with us doesn’t change at all” if they decide to switch electric companies.

“There’s a misunderstanding that these other electric suppliers are competing with us. They’re not. The electricity that we now sell to customers is a pass-through. We sell it to them exactly what we pay for it,” he said.

When residential customers contract with a retail electric supplier, AmerenCIPS still is the distribution or delivery company. AmerenCIPS will still get a check for the use of its system, just as it does now. The cost of electric generation will be the only difference.

That’s a hard concept for many customers to understand.

Illinois deregulated its electric utilities starting in 1997. Rather than the private utilities owning both the generation facilities and the delivery systems, the state required that generation and delivery become separate entities.

Former state Rep. Art Tenhouse of Liberty remembers the deregulation vote 12 years ago. At the time, everybody thought customer choice was just around the corner.

But electric suppliers were much more interested in serving business and institutional customers. That’s the only place where competition sprung up. Residential customers did not have anybody bidding to serve them.

“Large companies, even if they shave (a little) off their rate, can have a huge difference in their costs,” Tenhouse said.

By contrast, there were very small savings available to residential customers until after a 10-year freeze on electric rates ended in 2007.

Electric rates charged for the three buildings covered under the Adams County contract — the courthouse, Highway Department building and the juvenile center — show what can happen for very large customers. The electric rate charged by AmerenCIPS’ traditional generation service in 2008 was about 6.9 cents per kilowatt hour. The rate for 2009 under a contract with BlueStar Energy Services Inc. came in at 6.3 cents per kWh. For the coming year, the rate will be 5.58 cents per kWh.

Jon Casadont, chief legal officer for BlueStar Energy, said the company buys electricity on the wholesale market and can get attractive rates that it passes on to customers. There has been growing interest from residential customers, he said, but it will take time for people to adjust.

“We recognize that it is a gradual process, like the telecom revolution was years ago,” Casadont said.

He foresees a day in the future when people see shopping for inexpensive electricity as second nature.

By DOUG WILSON

Herald-Whig Senior Writer

 

dwilson@whig.com/221-3372

 

Technorati Tags: electricity deregulation, energy deregulation

Chamber speaker: Changes on the horizon for your electric bill

 

ROYERSFORD — “You’d better shop around.” Commissioner Robert F. Powelson with the Pennsylvania Public Utility Commission echoed the words made popular years ago by Smokey Robinson & The Miracles when discussing the upcoming expiration of electricity rate caps.

In a little more than a year’s time, on Jan. 1, 2011, the electricity rate caps that have been in place since 1996 in the majority of the commonwealth will go away. Rate caps already have expired for six utilities statewide.

Consumers will then have an opportunity to “shop” for providers for the generation portion of their power bills, Powelson told members of the TriCounty Area Chamber of Commerce gathered for a breakfast meeting Thursday at Spring-Ford Country Club.

“Many people are not aware that in 2011 — 2010 for PPL — the rate caps are coming off,” said Powelson, a Kennett Square resident and former president of the Chester County Chamber of Business and Industry. This means electric rates will rise to meet the true cost of generation.

“Nothing’s going to change except for that one little part of the bill — the generation rate,” he said.

For Pottstown area ratepayers, this means PECO Energy will continue to distribute electricity. Where that electricity is generated, however, can be decided by the consumer.

Taking the time to shop for electricity and practice better energy conservation will help to keep your electricity bills in check, Powelson said.

Now — before the rate caps expire — is the time to look into installing “smart” technology at home, such as bi-directional smart meters that provide feedback to the electricity provider as well as the consumer, digital thermostats and compact fluorescent lightbulbs, he said.

Replacing older appliances with Energy Star appliances and weatherizing your home to increase energy efficiency are also recommended.

Switching to CFL bulbs alone “will save you $70 to $100 on your energy bill in one year,” Powelson said.

An energy-saving option that will become available to PECO customers in the next year is a time of use rate, Powelson said. For example, a person who does a load of laundry in off-peak hours, such as late at night, will receive a lower rate than a person who does that same load during peak hours of the morning.

Powelson encouraged consumers to ease the transition by taking advantage of “phase-in” programs such as PECO’s Voluntary Market Rate Transition Phase-In Program, a savings plan that matches customer contributions with 6 percent interest. “You take it with you when you shop for a new generation supplier,” Powelson said.

Businesses will be able to utilize conservation service providers who “will come to your business and do an assessment of your HVAC and lighting systems on a pay-per-performance contract,” Powelson said.

Making upgrades now could be advantageous to small businesses in Pennsylvania who will be able to “leverage state monies now for later,” he said

Improvements in the energy efficiency of all state buildings have resulted in “savings for the commonwealth into the millions,” Powelson said.

Many companies are going the LEED-certified route, which will help them — and the environment — in the long run, he added.

The PUC has been regulating legislation enacted to help Pennsylvania service providers prepare for the rate cap elimination. Per Act 129 of 2008, service providers are required to reduce overall energy demand by 1 percent by May 2011 and to further that reduction to 3 percent by May 2013. Also by May 2013, providers must reduce by 4.5 percent in 100 hours of peak demand, according to Powelson.

If those service providers — including PECO Energy — fail to comply, they can be fined up to $20 million, he said

Deregulation came about with the Electric Generation Customer Choice and Competition Act of 1996 “because Pennsylvania electricity rates were 15 percent higher than the national average,” Powelson said. Since that time, the state has had stable rates and has realized a $7 billion savings, he said.

Come 2011, however, the electricity distribution rates, which have been capped since 1996, may go up. PECO and other providers will likely ask for an adjustment of that rate, Powelson said, which underscores the desirability of shopping for the rate you will be able to control through competition — the generation rate.

“When the rate cap comes up, the ‘d’ in default stands for ‘dumb’ for not shopping,” Powelson said. “And by the way, PECO wants you to shop. They’re not going to be offended if you do.”

By Michelle Karas, mkaras@pottsmerc.com

 

Technorati Tags: electricity deregulation, electricity deregulation Pennsylvania

APPA, Public Interest Groups Call on FERC, Congress To Investigate Rising Utility Costs

High electric rates are forcing a growing number of low-income consumers to choose between energy, medicine and health care. The American Public Power Association, the National Consumer Law Center, Public Citizen, and other public interest and low-income representatives are calling on Congress and the Federal Energy Regulatory Commission (FERC) to investigate these prices and protect consumers.

While there are a number of reasons behind high electricity rates, one major contributor is the deregulated electricity markets. The 42 million consumers in full retail choice states served by Regional Transmission Organizations are being hit hardest – their rates are 55 percent higher than those in regulated states, a gap that has been increasing, according to data from the Energy Information Administration.

“At a time when consumers are facing extreme hardships from rising electricity costs and growing numbers face shut-offs, FERC must assure electric rates are just and reasonable.” said Mark Crisson, president of APPA. “The promises of deregulation – competition and lower prices – have not been kept. While energy costs across the country have risen, the electric rates in deregulated markets have climbed faster than the rates in regulated areas.”

A recent survey of low-income households by the National Energy Assistance Directors Association found the percentage who sacrificed food to afford electricity bills rose from 22 to 32 percent since 2003, a 70 percent increase. The percentages of those forgoing medical or dental care or prescription medicine rose by 10 and 26 percent. This same survey found that electric bills have risen since 2007 and that almost half the respondents skipped paying or paid less than the amount of their total energy bill.

“Last year, the number of consumers unable to pay utility bills reached record levels and this trend shows no signs of letting up given the current economic climate,” said John Howat of the National Consumer Law Center. “Nobody, no matter what your income level, should be forced to choose between medical care and keeping the lights on in their home.”

A recent survey by the National Association of Regulatory Utility Commissioners covering 42 million electricity customers nationwide found that one in five had past due electric bills. Data collected by the National Consumer Law Center shows that in Pennsylvania, the number of terminations of utility service jumped 73 percent from 2004 to 2008. In Ohio, applications for the state’s energy affordability program have increased 63 percent since 2003. And Rhode Island’s service disconnections for non-payment were the highest of any year on record in 2008 and 21 percent of those accounts were not restored.

“”It is time for lawmakers to erase Enron’s legacy and ensure that FERC enforces that all electric rates be just and reasonable,” said Tyson Slocum, Director of Public Citizen’s Energy Program.

While consumers continue to struggle to pay their electricity bills, the deregulated markets serving about two-thirds of the country, continue to create opportunities for excessive profits for a handful of companies that own generating plants. As Congress works toward passage of federal climate legislation, consumers in these markets will also pay for the additional layer of windfall profits that will result from a carbon allowance cap-and-trade system, according to a recent study by Synapse Energy Economics.

Despite numerous requests for an investigation into the rate disparities and escalating costs in areas served by Regional Transmission Organizations from consumer, business and public interest groups FERC has taken little action. FERC is the federal agency charged with regulating wholesale electric power markets and is required by the Federal Power Act to ensure that the rates consumers pay are fair and reasonable.

The organizations below are urging consumers to call their Senators and Representatives and demand that FERC act to protect consumers.

The American Public Power Association

Technorati Tags: electricity deregulation

Energy aggregator Tremcor pushes to pool Texas retail users who want better rates

 

Roy Anderson thinks he has a way to make deregulation so sweet for consumers that everybody in the country will want an electricity market just like the one in Texas.

Anderson, who grew up in Zambia and spent much of his professional career in Canada, runs a company called Tremcor Energy Inc. that’s known as an aggregator. He brings together pools of electricity customers and negotiates cheaper rates for them with retail electric providers.

This week, Tremcor is offering a two-year fixed rate of 11.9 cents, equal to some two-year offers from electric companies and lower than many.

“My original goal was to aggregate so successfully here that it would deregulate the rest of the United States,” Anderson said.

In the energy industry, nothing is ever that easy.

Aggregators struggle to explain their business strategy to customers and to win their trust.

Once an aggregator has collected enough customers, he must persuade retail electric providers to negotiate with him.

If Anderson’s past is any indication, he may be up for the task.

Anderson was born to a family of white landowners in Zambia who fled to South Africa when he was a boy. He traveled the world as a young man, eventually making his way to Canada.

There, he made his fortune aggregating natural gas customers. Anderson started Dominion Energy Resources and signed up 300,000 homeowners.

He later moved to Florida and married. He and his wife lived in a $3 million home with eight kids and operated a pet food business called Happy Paws.

Gone to Texas

When Anderson heard that Texas was deregulating its electricity industry, he itched to try aggregation all over. So, he sold his $3 million home, moved his family into a $1 million home and took his seed money to Texas.

“I started in South Texas because I wanted to be off the radar to get going,” he said.

In 2003, Anderson hired a manager and some salespeople, and eventually collected about 10,000 customers.

Already, he’s had more success than just about anybody else who has tried to aggregate retail electric customers in Texas.

The Public Utility Commission’s list of official aggregators has hundreds of names. Most of them are electricity brokers who negotiate deals for corporations. Hardly any of them even use their aggregator license.

“More often than not, we sign the customers, business clients up without aggregating them,” said Jim O’Reilly, owners of Credo Energy, which advertises itself on the Web as an aggregator.

He said businesses could get a better price by aggregating into a large pool, but commercial clients prefer individual, customized agreements.

O’Reilly doesn’t work with residential customers.

Some nonprofit groups have tried to aggregate residential customers without success.

Cities Aggregation Power Project, started by lawyers with the Lloyd Gosselink firm, negotiates lower prices for cities.

“We’ve been able to save cities millions of dollars over what they otherwise would have paid,” said Thomas Brocato, a lawyer with the firm.

But when Brocato tried to apply the model to residential customers, he gave up. The group paid for an ad campaign and signed up 1,000 residents in five cities in the Texas Hill Country. But it couldn’t negotiate a good deal.

“When we shopped bids from retail electric providers, we just didn’t get meaningful responses,” Brocato said.

“Some made comments that this wasn’t enough to make it worth their while, no different than signing up a very large apartment complex. We also had reason to think that perhaps they weren’t as thrilled about seeing us succeed.”

CAPP and other groups have urged the Legislature to automatically put residents in the power pool with their cities. This would allow regular people to enjoy the low rates that city governments negotiate.

This type of aggregation is called opt-out. People would automatically be part of the program unless they choose to leave it.

An opt-out aggregation program in Ohio has cut rates as much as 12 percent.

The program is “a way to give opportunities for residential customers and small commercial customers who didn’t otherwise have any leverage in the market,” said Leigh Herington, executive director of the Northeast Ohio Public Energy Council, the largest public aggregator in the country.

He said utilities didn’t exactly welcome the program when the Ohio Legislature included aggregation in the laws that deregulated the industry.

“Ohio is so successful that I think there are probably utilities in other states that see that as a difficult program for them,” he said.

In Texas, similar aggregation bills have failed.

Electricity providers lobby against it. They argue that deregulation is supposed to give people a choice, not make a choice for them.

Not on the list

PUC members, staunch defenders of deregulation, encourage people to compare prices and choose a provider at the commission’s Web site, www.powertochoose.org. But the PUC won’t list Tremcor’s aggregated offerings on the site.

PUC spokesman Terry Hadley said aggregators aren’t technically offering the products themselves. The commission cannot be sure that aggregators can guarantee the price.

So Anderson is attacking the North Texas market the hard way. He is hiring 300 salespeople to go door to door wearing Tremcor uniforms. They will explain the company’s business model and try to persuade people to sign up for something they’ve probably never heard of.

Once the Dallas sales staff is in place, Anderson will move on to Houston.

Anderson said there are benefits for customers beyond better pricing. Sometimes he can negotiate a longer-term deal than people can find on their own. When the contract is up, Anderson negotiates a new one, so customers never have to worry about switching.

If the electric provider doesn’t treat customers well, Anderson intervenes.

Sometimes he persuades providers to waive deposits for customers who would normally have to pay them.

Last year, some of Tremcor’s customers were with one of the electric providers that went bust. He moved the Tremcor customers to a new provider right away, while most customers found themselves dumped on other electric companies with high rates.

Anderson has solved one problem that the nonprofits faced. The nonprofits tried to gather customers before negotiating a deal. That meant customers had to sign up without knowing how much the power would cost.

Tremcor negotiates with electric companies before gathering customers. Company officials are constantly negotiating deals, then scrambling to find customers to fill the pools.

Anderson said he has no trouble finding electricity providers to offer him deals, but he just can’t persuade the older companies to negotiate with him.

“The newer companies are hungry,” he said.

Right now, Anderson’s problem is persuading residents to break their contracts to go with Tremcor. Even though in many cases he can save customers enough money to more than offset the termination fee, people are reluctant to do it, he said.

Anderson makes a commission on every kilowatt-hour his customers use.

He expects that once he gets 50,000 more customers, he will finally make a profit.

AGGREGATOR Q&A

WHAT IS AN AGGREGATOR?

An aggregator is a company or nonprofit group that negotiates electricity deals with retail electric providers on behalf of customers.

HOW DOES AGGREGATION WORK?

The aggregator collects a group of customers.

The aggregator then goes to retail electric providers, such as TXU Energy, Reliant, Gexa or StarTex, and asks to negotiate a reduced rate for the group of customers.

The customers normally agree to stick with the group for a certain period.

If something goes wrong with the electricity provider, the aggregator can intercede on customers’ behalf or move the group to a new provider.

HOW DO AGGREGATORS MAKE MONEY?

Tremcor, a for-profit aggregator, gets a commission for every kilowatt-hour of electricity its customers use.

By ELIZABETH SOUDER / The Dallas Morning News
esouder@dallasnews.com

Technorati Tags: electricity deregulation, Texas

ENERGY: California utilities ask regulators to upend power rates

 

Heavy users would get discount; light users would pay more

California’s three largest utilities have asked regulators to restructure electricity rates, raising prices for low-usage customers and lowering them for the highest.

If successful, the move would upend the rate regime put into place by lawmakers after the 2000-01 meltdown of California’s utility deregulation.

San Diego Gas & Electric Co., Southern California Edison and Pacific Gas & Electric Co. have independently applied to the California Public Utilities Commission to allow them to change their rate structures.

The utilities use a four-tier system to group ratepayers. The users of the least amount of electricity are in Tiers 1 and 2. These users would see increases of 5 percent, or just under a penny per kilowatt-hour more.

Taking into account variations in peak and off-peak pricing, SDG&E spokeswoman Denise King said that works out to about $3 more per month for a home that uses 500 kwh. Heavier users of electricity, who make up Tiers 3 and 4, would see drops of 4 percent, or 1.3 cents per kilowatt-hour. King says that’s roughly $4 per month for a 1,000-kwh user.

The rates for low-usage customers have been frozen since 2001, when the Legislature locked them in as a part of Assembly Bill 1x. The law was intended to encourage conservation by penalizing electricity consumption above a “baseline” amount. In the years since, higher-usage customers have absorbed regular increases until they have been paying more than twice as much per kilowatt hour.

“Customers paying in Tiers 3 and 4 have been essentially subsidizing the usage in the lower tiers,” King said.

In the spring, state Sen. Christine Kehoe, D-San Diego, sponsored legislation allowing for a modification of the rates. Gov. Arnold Schwarzenegger signed the bill into law in the midst of his 230-bill signing frenzy in October.

The new law unfreezes the low tier rate. Annual increases for Tier 1 and 2 customers will be tied to the Consumer Price Index, with a minimum increase of 3 percent and a maximum of 5 percent.

King emphasized in her comments that the new law was supported by advocacy groups. The Utility Reform Network, an advocacy group based in San Francisco, lobbied in the Legislature to protect the rate freeze, but felt they had to compromise on a new rate structure in the end.

“We reluctantly agreed to that because there was a lot of political pressure to get rid of the rate freeze completely,” said Mark Toney, TURN’s executive director. “What we’ve preserved for the baseline rate is, we’ve preserved limits for how much those go up; they cannot go up more than 5 percent per year at the very most.”

The law also protects low-income users enrolled in the California Alternate Rates for Energy program from any increase.

Some environmentalists were put out by the proposals.

“From a policy perspective, even through electricity is tiered, it doesn’t really help conservation,” said Marco Gonzalez, an attorney with the Coastal and Environmental Rights Foundation. “They should use conservation incentive-based tiering.”

SDG&E has asked the PUC to merge its application with those of the other two major utilities, and they’ve applied for speedy approval. If the rates are confirmed by the PUC on Dec. 17, they will take effect on Jan. 1, 2010.

By ERIC WOLFF – ewolff@nctimes.com

Call staff writer Eric Wolff at 760-740-5412.

 

Technorati Tags: California, electricity deregulation

State Officials Look To End Electric Deregulation

Half Of Payments Made To Conn. Electric Companies Don’t Go To Them

HARTFORD, Conn. — Connecticut pays the highest electricity rates in the continental United States. The only state that pays higher electricity rates is the island state of Hawaii.

Close to half the payments you make to Connecticut Light and Power or United Illuminating do not end up going to those companies. The payments go to wholesale electricity producers. And some state leaders said wholesalers are profiting handsomely from a system that is not working.It’s hard to live without electric power.

However, it seems to be getting harder and harder to pay for it here in Connecticut and the prices seem to skyrocket during certain months of the year.Figures from the United States Energy Information said in 2007, the average retail price of electricity in Connecticut for residential customers was almost $150 a month.The only places in the continental United States that come close to what Connecticut pays were Texas at $140 a month and Maryland at $129 a month.Consumers like Robert Santerre are not sure how much more they can afford.Santerre said, “You have to take a whole check, a whole paycheck, just to pay a month of heat.

“State leaders, like Rep. Vickie Nardello, Chairwoman of Connecticut’s Energy and Technology Committee, admit that decade ago they supported the deregulation of the electricity industry as part of an effort to lower prices. Deregulation meant ending the monopolies held by electric utilities.Connecticut Light and Power and United Illuminating had to get out of the business of making electricity and sell off their power plants. That left them to only deliver electricity on their power lines.The idea was that other companies would make the electricity, and people could choose where they bought it.

Connecticut Attorney General Richard Blumenthal, who admits 10 years ago he supported electric deregulation, believes prices skyrocketed because of the way power is now sold.Part of the way that it’s done involves daily electricity auctions overseen by Independent System Operator New England.Blumenthal said, “This system is so broken. The least efficient, most costly source of power is the one that sets the price for everyone.”The nonprofit corporation set up to make sure the region has an ample supply of power holds regular wholesale auctions.

The real problem, critics added, was that in these auctions, the price of the electricity is often pegged to the bid offered by one of the most expensive power plants, which is usually fueled by natural gas, with coal and nuclear power plants costing a lot less.Nardello said, “Nuclear plants are paid as if they’re gas plants, coal plants are paid as if they’re gas plants, and what happens is you create windfall profits for those particular owners of those plants because of the fact they’re getting paid much more than the cost of producing the electricity.”So when natural gas costs were surging before the recession, Millstone, a producer of low-cost nuclear power, made an annual windfall profit in 2008 of more than $500 million, according to documents obtained from industry consultant Robert McCullough who has written research critical of ISO-New England pricing method.Natural gas prices are down because of the global recession, so the profits are not big. Millstone owner Dominion Resources questioned McCullough’s figures and pointed out it is just working within the rules set up by ISO-New England.Dominion said, “We are operating within the system that we didn’t create, we had no say whatsoever when deregulation was passed.

”The attorney general placed most of the blame on ISO-New England, whom he said made the electricity auction rules.Blumenthal said, “For consumers, this system has been a catastrophe.”Channel 3 Eyewitness News I-Team Reporter Len Besthoff asked ISO-New England why its auction pegs the wholesale price of power to the more expensive bids. Vice president of marketing development Bob Eithier said the profits electricity producers make give them an incentive to build even more power plants in the region.Eithier said, “I think the bottom line in Connecticut is, they’re in the best position they’ve been in as far as energy future for decades.

They have a robust transmission system, they have adequate resources, they have a great deal of new resources entering the market that are much cleaner than the old resources.”Several moves were made at the Capitol to give the state more control over electricity markets. Nardello tried several times to get a bill passed that would end retail electric choice, set up a state power authority to buy wholesale power directly from power generators at minimal markup and tax any profit generators made over that amount. That is something she believed could reduce electric bills by as much as 20 percent in the short term.Nardello said, “So the idea is you want to get out from under the ISO New England rules. We realize that they’re skewed to benefit generators.”This would, in effect, turn back the clock on significant chunk of electric deregulation in Connecticut.

The Energy Information Administration said that of the 22 states that deregulated their electricity markets and allowed retail choice, a third have backtracked and suspended their programs.State Rep. Terry Backer, who used to be the chairman of the Energy and Technology Committee, said even if Connecticut suspended electric deregulation and lowered everyone’s bills, it would not solve anything because people will use more power.Backer said, “In the end of it, we need to help people use less energy.”Meanwhile, hundreds of Connecticut businesses are taking advantage of the choice electric deregulation has brought to Connecticut.Prospect Machine Products participates in a bulk purchasing program that The Connecticut Business and Industry Association offers, getting Rich Laurenzi 10 to 20 percent off retail electric prices.Nardello said that while her bill attempting to roll back electric deregulation failed during the last legislative session, it was the closest she has come so far, and she and others plan to try to introduce a similar bill soon.

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New York Deregulation Failing, Says Central Hudson Executive

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