PhillyDeals: PhillyDeals: Rendell has twist for electric rate hikes

Exelon Corp.

shares fell to a 20-month low yesterday as

Gov. Rendell

threatened to extend Pennsylvania's electric-power price controls. The stock closed at $62.53, down $3.92.

In fact, Rendell is lobbying to make electricity price increases possible, after 10 years of price caps. What else can he do? Fuel costs are up. Demand is up. It's natural the price will rise. But politicians find it tough to speak clearly.

Rendell threatened "incredible economic hardship" and power-rate increases of up to 60 percent by Exelon and other utilities if nothing is done. (Exelon's Philadelphia-area increase would actually be closer to 20 percent, said

Cathy Engel

, spokeswoman for Exelon's subsidiary here,

Peco Energy Co.

)

By making the future look extra ugly, Rendell

wants legislators and the public to agree to increases that would be phased in over time and subjected to some complex conditions.

But how much more would power really cost, compared with that 60 percent bogie? "It's difficult to predict," said Rendell spokesman

Chuck Ardo

. "He has no way of knowing that."

Instead of spelling out the rate increases that will accompany the power bills he backs, Rendell pointed to popular features like incentives for wind power and peak-period pricing - things Exelon says it supports anyway.

Peco

accepted rate caps 10 years ago as part of a deal that was supposed to attract competing power suppliers, which would set a market price so the state could stop regulating. But that hasn't worked, despite a state-funded ad campaign.

So consumer power prices stayed flat, while "our costs go up," Exelon chief financial officer

Matthew Hilzinger

complained to investors at a

Lehman Bros. Holdings Inc.

conference last Thursday in New York.

Exelon had hoped to have "full competitive retail markets in Pennsylvania" last spring, he added. That didn't happen, so Peco plans to file for higher rates with the state Public Utility Commission, citing higher costs, fairness and efficiency, Hilzinger told investors. Rendell said the PUC should phase increases gradually. Peco's Engel agrees.

Exelon said it was in a great long-term competitive position because of its heavy reliance on nuclear power (instead of oil or coal). But first, it has to figure out how to make consumer sales more profitable.

Investors aren't being patient: Exelon stock is down 30 percent in the last two months, compared with a 13 percent drop for the S&P 500 Utilities stocks. The gap is even bigger than it looks, because Exelon is the biggest stock in the utilities index.

"Full market rates in Pennsylvania would mean a significant bump [40 percent] in Exelon profitability, but odds are that some form of compromise will be required," credit analyst

Philip Adams

of

Gimme Credit L.L.C.

told clients in a report yesterday.

The company that insures Philadelphia public housing gave

Philadelphia Housing Authority

chief

Carl Greene

a refund check for $542,000 yesterday from last year's $6.4 million city premium, citing a drop in claims by workers, tenants and visitors.

And this year's insurance fee by the

Housing Authority Insurance Group

fell to $5.4 million.

Partly that's because the city has been blowing up ugly old towers in places such as West Philadelphia's Mantua and Mill Creek neighborhoods. That means "fewer slips and falls on cracks in the old sidewalks," Greene said.

PHA has shrunken in other ways: Staff totals 1,150, down from 2,500 in 2000, due to Bush administration budget cuts and increased use of outside contractors, Greene said.

But PHA's job has actually gotten larger in that time. Greene said there were 14,000 occupied PHA units this year, and about 1,000 were under repair or otherwise vacant.

That's compared with 11,000 occupied units - and 5,000 vacant - in 2000, he said.

Greene also credited better staff and tenant training under insurance manager

Ellen Hugar

, resulting in fewer fire, auto and wind claims.

"The fewer claims," said insurer president Dan Labrie, "the more dividend."