PP&L, Inc. asked the Pennsylvania Public Utility Commission late last week to approve various procedures related to the issuance of up to $2.85 billion in transition bonds that would be used primarily to recover costs, approved by the commission, of transitioning from a regulated to a deregulated electricity market in Pennsylvania.
As part of the approval of PP&L, Inc.'s restructuring plan in August 1998, the commission gave PP&L, Inc. authorization to issue transition bonds for up to $2.85 billion of the company's $2.97 billion in allowed transition, or stranded, costs.
John Biggar, PP&L, Inc. senior vice president and chief financial officer, said, "The issuance of these transition bonds will be another major step in the financial restructuring of PP&L, Inc. If all goes as planned, we expect to issue the bonds early in the third quarter of this year."
Customer bills currently reflect a Competitive Transition Charge, a mechanism established by the Pennsylvania Customer Choice Act to recover transition costs. In last week's filing, PP&L, Inc. asked the commission to approve establishment of an Intangible Transition Charge on customer bills, another approved method for recovering such costs. This change will result in a reduction of customer rates because the Intangible Transition Charge will be more than offset by a decrease in the Competitive Transition Charge that currently appears on customer bills.
Biggar said the issuance of these bonds is expected to result in savings to PP&L, Inc. and its customers. While actual savings will not be known until the bonds are issued, the company currently estimates that customer savings may average, on a system basis, about 1 percent per year over the 10 years the bonds will be outstanding. Actual savings will vary by rate schedule and usage.
PP&L, Inc. is asking the commission to act on its request by June 1. If the commission approves the company's request and the transition bonds are issued as expected, the rate reduction should be reflected on customer bills beginning in July or August.
Morgan Stanley Dean Witter & Co. is serving as the company's lead agent for the transition bond issuance. Biggar said a registration statement for the transition bonds was filed with the Securities and Exchange Commission on March 30, 1999.