Pennsylvania Power & Light Co. customers will save about $53 million under an agreement that will permit the Allentown-based utility to stop buying electricity from an independent power producer in Lackawanna County.

The agreement between PP&L and Archbald Power Corp. was announced Friday (10/4).

If the agreement is approved by the state Public Utility Commission and becomes effective, PP&L will pay Archbald $19.6 million during the next four years, and Archbald -- an 18 megawatt power plant -- will cease selling power to PP&L. April 1, 1997, is the expected date for the power sales to end.

"This action will reduce electricity rates for PP&L customers," said Doug Krall, PP&L's manager of Resource Planning and Pricing.

Earlier this year, PP&L agreed, subject to PUC approval, to terminate its power purchase contract to buy 100 megawatts of power from the Continental independent power producer in Luzerne County. That action, which is still pending before the PUC, will save PP&L retail customers more than $200 million.

"These contract purchases are consistent with PP&L's strategy to reduce costs throughout the company as we prepare for a more competitive electric utility industry," Krall said. "Contracts like this one have locked utilities into paying prices above the current market value of electricity. This is another example of how we are preparing ourselves to better serve customers as we move to a competitive market."

The prices PP&L pays to purchase electricity from the Archbald plant -- which were agreed to in 1986 and were consistent with estimates of future prices made at that time -- are now higher than what it costs PP&L to generate electricity or to purchase electricity on the open market. The PUC approved the price PP&L pays to Archbald for electricity.

"We are not purchasing the power plant," Krall said. "We are acting in our customers' interest and terminating PP&L's obligation to buy the power. If Archbald chooses to do so, it is free to continue operating the plant and to sell its power to wholesale customers other than PP&L. Any decision about the future of the plant rests with Archbald's management."

Customers pay for the costs of power purchase agreements with independent power producers through the Energy Cost Rate portion of electric bills.

"The $19.6 million buyout amount is much less than what it would have cost PP&L and its customers to continue buying power from the plant during the 14 years that remained on the contract," Krall said. "Ending this contract provides PP&L retail customers with a net savings of about $53 million during that period."

PP&L will request PUC approval to recover the applicable portion of the buyout costs through the company's Energy Cost Rate.

"Even with the cost of buying out the contract and replacing the power, the Energy Cost Rate during the 49-month buyout period will be less than what it would have been under the existing contract," Krall said. "This is an immediate savings to customers."

PP&L entered the contract with Archbald under the requirements of the federal Public Utilities Regulatory Policies Act, or PURPA. That law, passed in 1978, mandates that electric utilities purchase electricity from small, independent power producers that seek contracts with the utilities.

PP&L serves about 1.2 million customers throughout a 10,000- square-mile area in 29 counties in central and eastern Pennsylvania. PP&L is a subsidiary of PP&L Resources, Inc.