If the prices paid in this supply purchase were to be the same for the remaining five purchases, small commercial and industrial bills would increase on the order of 18 percent to 37 percent in 2010.

Additional bids will be sought later this fall and twice each in 2008 and 2009 to secure the remainder of the 2010 supply that’s needed. Actual 2010 prices will not be known until all six supply purchases have been made and prices are averaged together.

As we award contracts over the next three years, we’ll continue to get a better picture of exactly how much generation prices may increase. We’ll keep customers updated every step of the way.

If better deals are available  in the competitive market in 2010, customers will have the ability to shop for a supplier to lower their bills.

How our purchase plan works

The company’s purchase plan for 2010 supply is designed to reduce the price risk residential and small business customers would face if we waited to purchase power all at once, potentially during a time of unusually high prices. It spreads supply purchases for these customers over three years.

PPL Electric Utilities will secure electricity supply for large industrial and commercial customers in the final round of bids in late 2009. Large customers who want to be considered in the bid process will need to opt into the process by Aug. 3, 2009. We will then seek bids for generation supply, award contracts Oct. 8, 2009, and communicate the resulting price information to large customers.

Large customers who meet the deadline for opting in to the bid process then will have until Nov. 7, 2009, to accept fixed-price service from PPL Electric Utilities for 2010. Those who do not accept fixed-price service and who have not chosen an alternative supplier will receive service from PPL Electric Utilities at hourly market rates.

Why the plan is needed

Our purchase plan is needed because state law and Pennsylvania Public Utility Commission regulations require us to buy generation supply for customers who don’t choose a competitive supplier.

The costs for that supply are reflected in the generation portion of customers’ bills and are passed directly through to customers without any mark-up by PPL Electric Utilities. Generation charges currently account for more than one-half of customer bills.

PPL Electric Utilities, which does not produce power, currently buys power for customers under a long-term supply contract. That contract, which resulted from a competitive bid process, expires Dec. 31, 2009.

Why we expect prices to increase

Prices are expected to increase in 2010 as caps on generation charges expire and prices reflect the true cost to buy electricity  in the competitive market. The prices customers currently pay for the generation portion of their bills were set in the late 1990s. Since then, the price of fuels used to generate electricity has risen dramatically.

What can customers expect before 2010

We expect that generation prices, which are capped through the end of 2009, will continue to remain well below market prices, as they’ve been for several years.