June 20, 2012
Penn Live
Eric Epstein
Remember when Pennsylvania consumers were promised rate relief and economic prosperity as a result of electric deregulation? On Aug. 4, 2000, Secretary of Revenue Robert A. Judge Sr. predicted a magical new world.
"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," Judge Sr. said.
It's been more than a decade since the Ridge administration guaranteed us lower rates as a result of deregulation. Let's see how much money we have "saved."
From 1999 to 2009, PPL collected $2.97 billion in "stranded costs" from rate payers for cost overruns at its nuclear power plant. This tax was referred to PPL's customers as a "competitive transition charge" on electric bills.
In 2004, PPL received an increase in distribution rates of $137 million. An average residential customer saw their monthly electric bill increase by 7.63 percent, or $9.03 as of January 1, 2005. The company had asked for a larger increase, but the Public Utility Commission scaled it back.
According to William H. Spense, president of PPL Electric Utilities, this rate request marked the initial leg in PPL's new strategy of making "modest rate requests" every few years.
In 2007, PPL proposed to increase distribution rates by $83.6 million or a 6.8 percent bump. An average residential customer would see their monthly electric bill increase by $6.60.
Generation rate caps came off on Dec. 31, 2009. The result in 2010 was that the average residential electric bill for PPL customers increased by 29.7 percent.
On March 1, 2010, PPL proposed to raise rates by $114.7 million or a 5.3 percent "modest increase." The average monthly increase for residential customers would be $7.50. This was the first post-rate cap increase, and represented a 27 percent jump in PPL's portion of your electric bill.
PPL is not done. On March 30, PPL filed for another rate hike of $104.6 million. PPL acknowledged the proposal "would produce an average increase in distribution rates of approximately 13 percent." However, the actual rate increase for the average residential electric bill would be 16.5 percent or a $7 per month, according to the Office of Consumer Advocate.
How badly is PPL hurting? On May 16, William H. Spense, chairman, president and CEO of PPL Corp. told shareholders that PPL was "fundamentally a different company" after it went on a buying spree. Spense said that the repositioning of PPL was completed through the acquisition of regulated utility operations in Kentucky in 2010 and the United Kingdom in 2011 at a combined cost of about $14 billion.
Spense's commitment to shared sacrifice was evidenced by his pay raise in 2011. Mr. Spense was awarded a "modesty bounce" that bumped his compensation package to $5,120,325. The issue is not whether PPL will get another rate increase. It will. The only question is how much.
Deregulation has been a financial windfall for electric companies in Pennsylvania. PPL bills you more for less electricity. Welcome to the brave new world of "rate-class" warfare. By the way, customers lost.