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Electricity reform draws praise

Advocacy group credits deregulation for lower rates

Friday, August 23, 2002

By Frank Reeves, Post-Gazette Staff Writer

Residential customers in Pennsylvania paid 20 percent less for electricity in 2001 than they did five years earlier, largely due to the state's efforts to restructure the electricity utility industry, the citizen-action group PennFuture said in a report released yesterday.

Rates for commercial and large industrial customers in the state fell by slightly less in the same period --16 percent for small businesses and offices, and 17 percent for factories and other big users.

Pennsylvania wasn't alone. Between 1996 and 2001, residential electric rates nationwide fell nearly 14 percent while commercial rates declined 13 percent and industrial rates dropped about 5 percent, the report said.

The group primarily credited deregulation for the drop-off, though others have said a slowing economy also played a role. The drop in rates coincided with the adoption of utility choice programs in 21 states, including Pennsylvania, and the District of Columbia, that freed consumers to choose suppliers. It also came amid a wave of mergers between energy producers and suppliers.

"This report clearly shows that eliminating the monopoly that utilities have held over electricity customers results in both lower prices and more clean energy," said John Hanger, PennFuture's president and chief executive officer. "And best of all, it is the little guys -- the residential customers -- that are getting the biggest cuts in their electricity bills."

Hanger, a former member of the state Public Utility Commission and a longtime advocate of restructuring the electric utility industry, said he hoped the report would refute arguments that deregulation has been a failure for consumers.

He also noted that in states which no longer require customers to purchase electricity from their local utility, a number of companies have entered the market offering so-called green power -- electricity generated from solar panels and windmills rather than "dirty" fuels such as coal and natural gas.

Hanger said the report undermines Bush administration claims that the United States is in the midst of an energy crisis, marked by tight energy supplies and high prices. As a result, there is no need to tap natural gas supplies by drilling in pristine wilderness areas, he said.

The past two years haven't been good for proponents of electric deregulation.

First, the California energy crisis hit, causing widespread power blackouts and a steep rise in electric rates. Then the Enron scandal broke, with allegations that the giant energy trading company tried to manipulate power markets for the benefit of its shareholders and top executives.

Whether fair or not, many blamed electric deregulation for the energy crisis in California and the Enron debacle. Indeed, some political leaders and consumer groups want to abandon deregulation and return to a time when local electric utilities were government-regulated monopolies, from which customers were required to buy their power.

Even those who accepted the figures used in the report -- data based on prices culled from the U.S. Department of Energy -- disagreed with PennFuture's conclusions.

David Hughes, head of the Squirrel Hill-based Citizen Power, said the "temporary, modest" decline in electricity prices has largely been due to government-imposed price caps and price controls rather than operations of deregulated wholesale and retail electricity markets.

Hughes said he was worried what will happen to electricity rates in Pennsylvania and elsewhere once these caps were lifted.

He also said the report failed to consider the effect that the increasing consolidation of the electric delivery and generating industry was having on the creation of competitive wholesale and retail markets.

Frank Reeves can be reached at freeves@post-gazette.com or 412-263-1565.

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