Competition is inevitable in the electric utility industry and, therefore, a framework is needed to ensure a fair and equitable transition for all customers and electric utilities, according to testimony filed by Pennsylvania Power & Light Co. Monday (11/6) with the state Public Utility Commission.

The written testimony of PP&L Chairman Bill Hecht was submitted as part of the PUC's ongoing investigation into competition in Pennsylvania's electric power industry. Hearings will be held on the subject in December and January.

"It's PP&L's judgment that further deregulation and restructuring are inevitable," Hecht writes in the testimony. "PP&L believes that increased competition in the electric power industry can be beneficial to Pennsylvania's utility customers, utilities, and the commonwealth itself."

PP&L's filing also responds to 50 questions on competition the PUC issued for public comment. Following review of the written and oral testimony, the PUC will issue a final report on competition to the governor and the General Assembly. The report's target date is April 1996.

PP&L's testimony points to customers as the primary force behind the move toward competition.

"The most visible signs of this evolution (toward competition) are the various legislative and regulatory initiatives underway at both the federal and state levels," Hecht states. "But, the evolution is being fundamentally driven by the desire among customers for lower prices and choice of suppliers."

Without initiatives to introduce more competition, customers will find ways within existing regulation to secure for themselves some of the benefits of competition, Hecht says.

"We are concerned that such actions taken by a few customers acting in their own economic interest can lead to serious inequities," Hecht says. A structure that permits full access for all customers -- although the most difficult to achieve -- is the most equitable model for regulators to aim toward, Hecht says.

"Any structure that doesn't allow for access by all customer classes will, in the end, disadvantage one or more classes of customers," Hecht states.

For these reasons, PP&L previously has advocated the need for an orderly transition and "rules of the road." In the testimony, PP&L takes its analysis one step further and postulates what a competitive industry may look like -- an industry that is structured along functional lines, such as generation, transmission and distribution.

The generation segment would be competitive -- meaning that the generation divisions of utilities, independent power producers, power brokers and power marketers would bid for power supply opportunities. The transmission and distribution segments would remain regulated by the appropriate federal and state regulators.

Hecht said that type of industry would create two critical issues that must be addressed: recovery of stranded costs and assurance of reliability. The testimony includes specific recommendations to address both critical areas.