PPL Electric Utilities recommended a long-term strategy today for completing a smooth transition to competitive electricity markets in Pennsylvania while achieving the best deals available for the state's electricity users.

In testimony before the Pennsylvania Public Utility Commission, the company recommended that Pennsylvania establish a tightly structured, state-run process for procuring electricity supply for customers who do not select an alternative supplier in 2011 and beyond.

In cases where customers do not choose a supplier, utilities are required to purchase electricity on behalf of those customers as the "provider of last resort" (POLR).

"PPL applauds the PUC for its early planning on how to best transition to market-based prices when POLR rate caps begin expiring in several years," said John Sipics, president of PPL Electric Utilities.

"We are pleased to participate in the PUC's process and believe that any outcome or decisions should provide customers with choices when it comes to electricity supply," Sipics said. "We also believe that suppliers — not customers — should continue to assume the financial risk of building new power plants."

In its comments and testimony, the company recommended a staggered approach to procuring electricity in the state. Under its proposal, all utilities in the state would follow a common procurement schedule and standardized process. Portions of utilities' POLR supply needs for 2011 would be procured in 2008, 2009 and 2010.

The state ultimately would move to annual procurements in which utilities would obtain one-third of their POLR electricity supply needs for each of the next three years. In 2014, for example, utilities would procure one-third of their POLR supply needs for 2015, 2016 and 2017.

"This would avoid the risk of utilities boxing themselves into a corner where they have to procure all of their POLR supply needs for a particular period all at once, perhaps at a time when prices are high," Sipics said.

By beginning to acquire POLR supply well in advance of when it is needed, utilities and consumers will be able to get an earlier sense of how rates may change in coming years, Sipics said. This also will support early consumer education and planning, he added.

In addition to proposing a statewide process for utilities to use in procuring POLR electricity supply for 2011 and beyond, the company announced that it will formally propose its own procurement strategy for securing POLR electricity supply for 2010. This PPL-specific approach will be filed with the commission on July 31. The strategy would meet the company's POLR supply needs until the proposed common schedule starts for all utilities in 2011.

Capped POLR rates expire for most Pennsylvania utilities at the end of 2010. However, they expire for PPL Electric Utilities at the end of 2009. These caps apply to the cost of electricity supplied to customers who do not choose an alternative supplier. The costs appear as generation charges on monthly bills. They were established during the deregulation of electricity generation in the late 1990s to ease the transition to competitive generation markets.

As envisioned currently, PPL Electric Utilities likely would procure portions of its 2010 POLR supply needs in each of three subsequent years — 2007, 2008 and 2009, said Doug Krall, manager of Regulatory Strategy for PPL Electric Utilities.

Krall, who represented PPL at the PUC's hearing today, said the company also will propose time-of-use rates that would enable customers to save money by using electricity during off-peak times, when demand is less.

"The best way to improve customer choice and achieve the full benefits of a competitive market is to complete the transition that was started nearly a decade ago in Pennsylvania," said Sipics. "And the key to making a smooth transition is having a sound strategy. Today's hearing was an important step in developing that strategy.

"Continued early planning will be essential so that the state and utilities can educate customers about the transition to market-based prices well in advance of changes taking place."

PPL Electric Utilities Corporation, a subsidiary of PPL Corporation that provides electricity delivery services to about 1.4 million customers in Pennsylvania, has consistently ranked among the best companies for customer service in the United States. Headquartered in Allentown, Pa., PPL Corporation (NYSE: PPL) controls about 11,500 megawatts of generating capacity in the United States, sells energy in key U.S. markets and delivers electricity to more than 5 million customers in Pennsylvania, the United Kingdom and Latin America.