PP&L, Inc. said Friday (10/16) that it has received approval for a plan to speed up implementation of customer choice for residential customers in central and eastern Pennsylvania and to provide a "jump start" for the competitive electricity market for those customers.
"We were an early proponent of creating a competitive market for electricity generation in Pennsylvania and this plan underscores our continued commitment to playing a leadership role," said Frank Long, PP&L, Inc.'s executive vice president and chief operating officer.
The plan, which was approved by the state Public Utility Commission on Friday, has two main components:
- It allows all PP&L, Inc. residential customers to shop for their electricity supplier next January. Previously, only two-thirds of the company's 1.1 million residential customers had that option.
- It provides for the sale of capacity, one component of wholesale electricity, at below-market prices to give a boost to the developing residential retail sales market in the area served by PP&L, Inc.
"We are pleased to be able to immediately offer all residential customers the opportunity to shop and learn more about this competitive market -- which is the future of electricity supply in Pennsylvania," said Long.
Long also said the company will voluntarily offer capacity at $19.72 per kilowatt-year in 1999 for any PP&L, Inc. residential customer who wishes to shop for a new supplier. The company would provide this subsidy to the supplier that will sell electricity to that customer.
"While we continue to believe the forces of supply and demand are setting appropriate capacity prices, we designed this plan to provide a jump start for the competitive market in the areas served by PP&L, Inc.," Long said.
"We understand the PUC is concerned about the number of offers being made to residential customers in the competitive market," said Long. "Our plan directly addresses this concern and guarantees suppliers a price for one year, beginning on Jan. 1, 1999. We are hopeful that this guarantee will encourage additional offers to residential customers in the area served by PP&L, Inc."
To take advantage of the offer, suppliers would need to contract with PP&L, Inc. to buy the capacity before the end of March 1999.
Electric companies buy and sell electricity from each other on a regional grid. In that wholesale market, there are two separate commodities: an energy commodity that is associated with the hour-to-hour costs to generate electricity; and a capacity commodity that reflects the longer-term, fixed costs associated with building and maintaining power plants.
Long said that customer choice already has brought benefits to Pennsylvania and it will continue to do so. "Even though most experts agreed that the significant benefits of customer choice would come over the long-term, customers already are realizing savings. Most of the state's residential customers, for instance, will be receiving rate cuts on Jan. 1, 1999," said Long.
Pointing to the recent sale of a large generating plant in western Pennsylvania, Long said that the competitive marketplace also is encouraging new investment in generation facilities in the Commonwealth. "At PP&L, Inc., we are convinced that competition in the state is on the right track and will result in substantial benefits to all Pennsylvanians, especially if we remain focused on the principles of supply and demand setting the prices in the marketplace."
He emphasized that PP&L, Inc. is voluntarily, for a limited period, setting its capacity price at $19.72 per kilowatt-year for suppliers selling electricity to residential customers in PP&L, Inc.'s service area.
"We are pleased that we have reached an agreement that offers immediate potential benefits to customers while leaving intact the concept of a wholesale electricity market, in which prices are set by supply and demand under the oversight of a federal agency," said Long.
Long said PP&L, Inc. also supported a plan adopted by the Pennsylvania-New Jersey-Maryland Interconnection that would provide for a capacity market similar to the current market for energy. He said these procedures provide further opportunities for those who wish to participate in the capacity market.
The company also said Friday that the PUC has agreed to withdraw an order requiring PP&L, Inc. to sell capacity at a set price. PP&L, Inc. had challenged that order, saying the wholesale market is regulated by the Federal Energy Regulatory Commission, not the PUC. As a result of the PUC's decision to withdraw the order in the case of PP&L, Inc., Long said the company will drop its federal court challenge.