PPL Electric Utilities Recommends Strategy for Moving Beyond ‘Rate Caps’

PPL Electric Utilities has recommended a long-term strategy to the Pennsylvania Public Utility Commission for completing a smooth transition to competitive electricity markets in Pennsylvania while achieving the best deals available for the state’s electricity users.

The company in June recommended that Pennsylvania establish a highly structured, state-run process for procuring electricity supply for customers who do not choose an alternative supplier in 2011 and beyond. In cases where customers do not choose a supplier, utilities must purchase electricity on the customers’ behalf as the “provider of last resort” (POLR).

The long-term strategy recommended by PPL would address POLR supply needs after POLR rate caps have expired for Pennsylvania consumers. These caps expire for PPL Electric Utilities’ customers at the end of 2009. They expire for customers of several other major Pennsylvania utilities at the end of 2010.

PPL Electric Utilities recommended to the PUC that all utilities follow a common procurement schedule for the POLR supply needed to serve customers in 2011 and beyond. The company also recommended that procurements for any given year be spread out over the three previous years.

Following this approach, portions of the electricity supply needed in 2011, for example, would be procured in 2008, 2009 and 2010. This staggered procurement approach would help to ensure that utilities aren’t boxed into a corner of procuring all of their POLR supply needs at a time when prices are high.

The company plans to formally propose a similar strategy July 31 for PPL Electric Utilities to use in procuring electricity for customers who do not choose an alternative supplier in 2010. This would meet the needs of PPL customers until the common POLR supply schedule starts for all utilities in 2011.

PPL Electric Utilities outlined its recommendations in comments filed with the PUC June 15 and in testimony delivered during a special public hearing conducted by the PUC June 22. The PUC scheduled that hearing to discuss how best to complete the transition to a competitive generation market.

More details on the strategy recommended by PPL Electric Utilities can be found in PPL’s June 22 news release.