Sunday, September 21, 2014
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Peco looks to end of rate caps

Peco president Denis O'Brien has a message: Despite widespread fears of electricity rate hikes of 20 to 30 percent after rate caps expire on Jan. 1, the Philadelphia utility now expects the cost of power itself to remain relatively flat. Still, residential prices will rise about 10 percent if Peco gets a proposed hike in its distribution rate.

Peco looks to end of rate caps

Peco president Denis O'Brien stopped by the Inquirer today to discuss the rapidly changing power markets. One key  message, which he's offering to worried customers everywhere he goes: Despite widespread fears of electricity rate hikes of 20 to 30 percent after Peco's 14-year price caps expire Jan. 1, the Philadelphia utility now expects the cost of power itself to remain relatively flat.

On the other hand, Peco is seeking a distribution-rate increase that will add about 10 percent to the average residential bill - if it's approved as-is by the Public Utility Commission. That's basically the first such increase in 21 years, and O'Brien is understandably fond of asking people he visits to tell him how much prices have risen in their industries over time.   (A comparison O'Brien probably doesn't like so much is this one, showing that Peco's residential price of about 14 cents per kilowatt hour is still well ahead of the national average, 10.5 cents.)

Peco has a new website, PecoAnswers.com, where you can get answers to basic questions about what's coming. If you're interested in taking advantage of various energy-saving incentives, an even more valuable site is PecoSmartIdeas.com.

Of course, most consumers will probably wait to become engaged, and may focus only if actual money-saving choices emerge after price caps expire - or if prices jump because of energy-market disruptions. As things look now, a majority will probably stick with Peco's provider-of-last-resort offering.

In case you're wondering whatever happened to the flurry of interest in companies like Peco offering a broadband service to compete with that of Comcast and Verizon, O'Brien says it's still mostly talk.  "Broadband-over-powerlines was the holy grail that the industry looked at forever," he says. But so far, he says, no one seems to have solved the problem of getting the signal across high-voltage transformers.

There's a lot more going on that may interest consumers as the Philadelphia area enters the last phase of the electricity deregulation and restructuring - a process that began seemingly eons ago, with legislation back in 1996.

That legislation envisioned a basic trade: For a limited period and with overall rates capped, customers of utilities such as Peco would pay off billions in utilities so-called "stranded costs" - mostly costs built up for then-seemingly uneconomic investments in nuclear plants such as Limerick. In return, ratepayers would no longer bear any responsibility for those plants, and could buy their power from whomever they choose.

That single strand of history carries a load of hot-button issues (was it a giveaway? is competition a mistake?), and there are even more in the various tangents it took - including the eventual prosecution of State Sen. Vince Fumo as a result of secret dealings during the deregulation process.  Ironically, with stranded costs paid off, Limerick has become a cheap and profitable source of power for Peco's parent company, Exelon.  And nuclear power has won support from parts of the environmentalist community, because it doesn't emit the carbon dioxide that is causing climate change.

Meanwhile, natural gas has emerged as a key to U.S. electricity markets.  When prices were low a few years ago, deregulation seemed to promise eventual cuts in power prices. When they skyrocketed after Hurricanes Katrina and Rita, gas prices were a primary cause of spikes in power prices in states and regions where caps came off sooner than here.

Now they're down again,  and the exploitation of natural gas resources from Pennsylvania's Marcellus Shale formation has become one of the nation's biggest energy stories. (Read some of my colleague Andy Maykuth's articles here (on gas industry political contributions), here (on Gov. Rendell's efforts to enact a severance tax), and here (on how the Marcellus became a "game changer").

Stay tuned.

Jeff Gelles Inquirer Business Columnist
About this blog

Jeff Gelles, who writes the Inquirer's weekly Consumer 14.0 and Tech Life columns, takes a broad look at the marketplace of goods, services, and ideas.

Reach Jeff at jgelles@phillynews.com.

Jeff Gelles Inquirer Business Columnist
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