A settlement in the PP&L, Inc., restructuring case provides for a balanced transition to a competitive electricity generation marketplace that holds the promise of benefits for consumers, businesses and the state's economic development efforts, the company said Wednesday (8/12).

The settlement, which is signed by all the major parties in the PP&L, Inc. restructuring case, was filed with the state Public Utility Commission Wednesday for review and approval.

"We are very pleased that we have been able to reach an agreement that offers customers significant benefits and lessens the burden on our shareowners in the transition to a competitive electricity marketplace," said William F. Hecht, PP&L, Inc., chairman, president and chief executive officer.

Hecht said the settlement is a significant step forward in the implementation of customer choice in Pennsylvania.

"This settlement is the result of the good faith efforts — and the hard work — of the numerous parties in the case and PUC Chairman John Quain and Commissioner Nora Brownell," said Hecht. "This plan is good news for all Pennsylvanians.

"This restructuring settlement is an important element in the ongoing effort to create a competitive market for electricity generation in Pennsylvania," said Hecht.

Under the settlement, which must be approved by the PUC, all PP&L, Inc., customers would receive a 4 percent rate decrease in 1999. Customers would receive this reduction whether or not they shop for competitively priced electricity. In addition, the prices that customers pay for electricity delivery service would be capped through the year 2004. And, customers who continue to buy electricity from PP&L, Inc.'s distribution company would have the prices they pay for that electricity capped through 2009.

"This settlement provides significant new protections for customers in the transition to a competitive marketplace. Customers have the opportunity to shop for generation and they have a guarantee that the charges for the delivery of electricity will not increase for at least six more years,"said Hecht.

He pointed out that customers who are still buying electricity from PP&L, Inc., at the end of 2004 will be paying essentially the same price as they were paying in 1986. "This is a remarkable record of price stability that is unmatched in Pennsylvania," said Hecht.

Also under the settlement, PP&L, Inc., would be permitted to recover $2.97 billion in transition costs over an 11-year period. Hecht said the improvement in transition cost recovery is a key provision of the agreement.

"We are particularly pleased that the settlement improves the company's transition cost recovery while providing customers with upfront savings and with the opportunity to secure additional savings in the marketplace," said Hecht.

The settlement increases the first-year shopping credit to an average of 3.81 cents per kilowatt-hour. The shopping credit can be used by customers for comparison as they shop for a generation supplier.

Hecht said the settlement, if approved by the PUC, will mark the beginning of a new era for PP&L, Inc.

"We are very much looking forward to putting the regulatory debate behind us and competing in the new marketplace," said Hecht. "We are confident that our years of providing high-quality electricity services to customers at reasonable prices will serve us very well as we pursue the many new opportunities that are now open to us."

The settlement also underscores PP&L, Inc.'s commitment to environmental improvements by providing an estimated $3.2 million per year fund for the "development and use of renewable energy and clean energy technologies, energy conservation and efficiency." An independent seven-member board of directors will manage this fund.

The company also commits to more than $15 million per year in assistance and energy conservation programs for low-income customers.

"This settlement provides a blueprint for the development of new relationships among consumers, businesses, their electricity delivery company and their electricity generation supplier," said Hecht. "There is much work to be done, but this agreement sets a solid foundation."

In addition to setting prices for PP&L, Inc., services in the customer choice transition period, the settlement would:

• Allow two-thirds of PP&L, Inc., customers to shop for electricity supply on Jan. 2 of next year.
• Give customers the option to choose another licensed supplier to provide some metering and billing services.
• Permit PP&L, Inc., to issue bonds to "securitize" up to $2.97 billion in transition costs and provide 75 percent of the associated savings to customers.
• Require PP&L, Inc., to transfer its retail marketing function to a separate, affiliated corporation.
• Allow for competitive bidding, beginning in 2002, for the right to provide "last resort" service to 20 percent of PP&L, Inc., residential customers. (Last resort service is the provision of electricity supply to customers who cannot or choose not to shop in the competitive marketplace.)

Hecht said if the settlement is approved, PP&L, Inc., will withdraw all its legal challenges to PUC actions in its restructuring case. On July 15, the company appealed the order to Commonwealth Court and filed suits regarding the PUC action in state and federal courts.

The PUC is expected to take preliminary action on the settlement on Thursday (8/13). Thursday's vote will be followed by a public comment period and an anticipated final commission vote on Aug. 27.