Implementation of PA's Electric Competition Law

In December 1996, Pennsylvania Governor Tom Ridge signed the Pennsylvania Electric Generation Customer Choice & Competition Act, opening the door for electricity customers in the state to select the suppliers of their electricity. Under the law, competition must be phased in from November 1997 through January 1, 2001—at which point all Pennsylvanians would have the freedom to select their electricity providers. Because of the way the state’s utilities and regulators are implementing the law, however, all Pennsylvania customers will have choice of suppliers by January 2, 2000, a full year earlier than required by law.

Pennsylvania’s law requires that one-third of customers in each rate class be able to choose their electricity suppliers by January 1, 1999 (this figure includes the pilot participants who are already selecting their providers). By January 1, 2000, another one-third will be given the opportunity to choose. And then on January 1, 2001, Pennsylvania will be a fully competitive market where all electricity customers will be given a choice of providers.

Individual utilities reached agreements with the Pennsylvania Public Utility Commission (PUC) to settle the details of how they will restructure, though, and during the settlement process the utilities and the PUC decided to accelerate the transition to competition. Now, customers will be phased in more quickly and all customers will have choice by January 2, 2000.

Besides establishing start dates for competition, the Pennsylvania law:

requires pilot retail access programs, which began in November 1997. (See Pilot Retail Choice Programs for more detail.) Participants in these programs will be included in the first block of customers phased in to competition.

caps transmission and distribution rates for at least 4 ½ years.

allows stranded costs to be recovered through a Competition Transition Charge to be levied on customers’ bills for the next ten years.

allows utilities to securitize stranded costs and pay off the securitized "transition bonds" through an Intangible Transition Charge levied on customers’ bills.

gives the PUC authority to set standards for and license competitive suppliers to ensure they are operating in the public’s best interest. So far, the PUC has licensed over 50 providers. (Click here for a complete, up-to-date list of licensed suppliers from the PUC.)

requires utilities to "unbundle," or separate, the components of their rates on customers’ bills. Rates will be broken down into their distinct components of generation, transmission, distribution, and transition charges.

Utility Settlements

The Pennsylvania Public Utility Commission (PUC) was charged with reaching restructuring settlements with each Pennsylvania utility in accordance with the Pennsylvania restructuring law:

Allegheny Power. On November 19, 1998, the PUC approved its settlement with Allegheny Power subsidiary West Penn Power. Under the settlement, two-thirds of West Penn customers will be able to purchase power from competitive suppliers beginning January 2, 1999, and all its customers will be able to choose on January 2, 2000. The PUC set a system average price to compare for West Penn of 3.16 cents per kilowatt-hour. Click here to read the PUC news release on the West Penn settlement.

Citizens’ Electric Company. The PUC reached a restructuring settlement with Citizens’ Electric on June 18, 1998 that establishes a system average price to compare of 4.13 cents per kilowatt-hour. Under the plan, two-thirds of Citizens’ customers will have choice of suppliers on February 1, 1999, and all its customers will have choice on January 2, 2000. Click here to read the PUC news release on the Citizens’ Electric settlement.

Duquesne Light Company. Under Duquesne Light’s settlement with the PUC, which was reached May 21, 1998, it will offer choice to two-thirds of its customers on January 1, 1999, and to all its customers by January 1, 2000. Duquesne’s system average shopping credit is 4.01 cents per kilowatt-hour.

GPU Energy. The PUC approved settlements for GPU’s Metropolitan Edison (Met-Ed) and Pennsylvania Electric (Penelec) subsidiaries in September 1998 after GPU protested restructuring plans for the utilities set out by the PUC in the summer of 1998. Under the final settlement, all GPU customers will be able to purchase power from competitive suppliers on January 1, 1999. The system average shopping credit for Met-Ed customers is 4.35 cents per kilowatt-hour; the system average credit for Penelec customers is 4.404 cents per kilowatt-hour.Click here to read the PUC news release on the GPU settlement.

PECO Energy. The PUC in December 1997 rejected PECO Energy’s proposed restructuring plan and required the utility to adopt a PUC-developed plan. PECO disputed the order, however, arguing that it granted insufficient cost recovery and violated its First and Fifth Amendment rights. The PUC and PECO reached a compromise settlement on April 30, 1998. The deal, which combines elements of PECO’s original proposal and the PUC’s December 1997 order, guarantees customers savings of at least 8 percent beginning January 1, 1999. Under the plan, PECO will phase customers in on an accelerated schedule: one-third of PECO’s customers will have choice on January 1, 1999; another one-third will a day later, on January 2, 1999; and all customers will have choice on January 2, 2000. PECO customers receive a system average shopping credit of 5.09 cents per kilowatt-hour. Click here to read the PUC news release on the PECO settlement.

PP&L, Inc. Under the settlement it reached with the PUC on August 27, 1998, PP&L will give choice of suppliers to two-thirds of its customers beginning January 2, 1999, and to the rest of its customers on January 1, 2000. Its system average price to compare is 3.81 cents per kilowatt-hour. Click here to read the PUC news release on the PP&L settlement.

Penn Power. Penn Power reached a settlement with the PUC on June 18, 1998, which allows one-third of its customers choice on January 1, 1999; another one-third on January 2, 1999; and the remaining one-third on January 2, 2000. The system average shopping credit for Penn Power customers is 3.73 cents per kilowatt-hour. Click here to read the PUC news release on the Penn Power settlement.

Pike County Power & Light. All Pike County Power & Light customers will have choice of suppliers beginning May 1, 1999, under the settlement the utility reached with the PUC on July 23, 1998. The PUC set Pike County Power & Light’s system average shopping credit at 3.40 cents per kilowatt-hour. Click here to read the PUC news release on the Pike County Power & Light settlement.

UGI. The PUC approved a settlement with UGI Utilities that gives all UGI customers choice of suppliers on January 1, 1999. UGI customers will receive a system average shopping credit of 3.67 cents per kilowatt-hour. Click here to read the PUC news release on the UGI settlement.

Wellsboro Electric Company. Wellsboro Electric Company will phase in to competition one-third of its customers on January 1, 1999; another one-third on January 2, 1999; and the final one-third on January 2, 2000. Wellsboro’s customers will receive a system average shopping credit of 3.90 cents per kilowatt-hour. Click here to read the PUC news release on the Wellsboro settlement.