PP&L, Inc., said that Thursday's (6/4) Pennsylvania Public Utility Commission decision in the company's restructuring case is seriously flawed because it fails to recognize the balance that is necessary for a smooth transition to a competitive electricity marketplace in the state.
"We have deep concerns about the impact of this decision on the financial stability of the company, on our capacity to compete in the new marketplace and on our status as an important contributor to community and economic development in Pennsylvania," said William F. Hecht, PP&L, Inc.'s chairman, president and chief executive officer.
In Thursday's decision, the PUC said the company would be permitted the opportunity to recover only $2.864 billion of its $4.5 billion in competition transition costs. A PUC administrative law judge's recommended decision would have permitted the company to recover $4 billion.
Hecht said the decision, as it stands, is unacceptable. "While we regret the need to do so, we may have no choice but to contest this decision.
"This decision ignores the competition law's explicit language requiring the commission to consider, as part of its transition cost decision, a company's efforts to reduce or moderate customer rates," said Hecht. "We have a record of holding the line on prices that is unmatched in Pennsylvania. PP&L, Inc.'s customers today pay essentially the same price for electricity as they did in 1986. After factoring in inflation, this amounts to a 40 percent decrease in prices."
Hecht said PP&L, Inc.'s restructuring filing was fair and reasonable and that, even if approved in total by the commission, would have resulted in shareowners paying for an estimated $500 million in transition costs. Based on Thursday's decision, shareowners would be forced to absorb more than three times that amount.
He said the company is considering its legal options, which could include a request for reconsideration by the PUC or litigation in state or federal court. Hecht said the company will decide on the appropriate course of action following a review of the final order.
"If this decision is allowed to stand, it could have far-reaching negative effects on everyone who depends on the company, including employees, shareowners, customers and the communities of central and eastern Pennsylvania," said Hecht.
As a result of Thursday's decision, the company will further intensify its examination of costs in all aspects of its operations. "This examination will necessarily include an assessment of company employment levels. It may also be necessary to reduce the vital role that we play in community and economic development," said Hecht.
The company, Hecht said, also is conducting an overall assessment of its financial position. This assessment will include, among other things, an examination of the appropriate level of PP&L Resources' common stock dividend. "As a result of this examination, it is likely that we will have to reduce the dividend. It also is likely that we will be forced to take a substantial write-off," said Hecht.
"Since this process began, PP&L, Inc., has supported providing customers with the opportunity to shop and reduce the prices they pay for electricity," said Hecht. "But there must be sound judgment in the process, judgment based on the circumstances of the company involved. A one-size-fits-all approach is unfair and injurious to the financial stability of PP&L, Inc., which has prices which are below the national average and are the second lowest in the state."