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Electricity will be cheap -- for now
Go ahead, crank up your stereo and leave on the lights.
You might as well take advantage of your cheap power while it lasts. Because in just a few years, the Lehigh Valley's electricity rates are going up.
How high, exactly, is the subject of debate.
On the low range of the forecasts is an increase of 20 percent to 30 percent. That's what PPL Corp., which provides electricity to most of the region, told state regulators last summer to expect in 2010, when it enters the final phase of Pennsylvania's electricity deregulation plan.
As unappealing as that might seem to PPL customers, it's a lot better than what some parts of the state have experienced as result of deregulation. The 4,500 customers of Pike County Light & Power Co., for example, saw their rates go up 72 percent.
Before the first steps toward deregulation in the 1990s, most utilities owned both the power plants that generate electricity and the power lines that distribute it. PPL and other proponents of deregulation argued that splitting generation from distribution would lead to competition -- and lower rates.
But rates have remained low over the past decade primarily because of caps on generation charges, not because of competition. Energy companies agreed to those temporary caps in exchange for the right to set prices in the future without interference by the state.
The future for Pike County Light & Power arrived in the fall of 2005 -- shortly after Hurricane Katrina triggered a spike in energy prices. The company passed on those prices to its customers in the form of higher rates.
Sonny Popowsky, the state's consumer advocate, said Pike County Light & Power made the mistake of waiting until the last minute to buy wholesale electricity -- an approach he likened to "rolling the dice." If the company had contracted for electricity in advance, it would have reduced its exposure to market volatility, he said.
"Outside of Pike County, I think we've done pretty well in Pennsylvania," Popowsky said of deregulation. He noted that customers of one utility, Duquesne Light in the southwestern part of the state, have seen their rates go down.
PPL's rate cap will expire Jan. 1, 2010. Metropolitan Edison's will expire the following year.
Last year, Met-Ed, which has 153,000 customers in Berks County and 70,000 in Northampton County and a small part of Lehigh County, asked the PUC for permission to begin raising the amount it charges for generation four years early. The company said doing so was necessary to blunt the shock its customers will otherwise feel upon the expiration of its rate cap.
PPL took the unusual step of filing a brief to the state's Public Utility Commission in opposition to Met-Ed. No other electric company in Pennsylvania had been allowed to break its rate cap prematurely.
The PUC ruled against Met-Ed in January, although it did approve a smaller hike, relating primarily to the costs of electricity transmission over high-tension power lines.
In Pennsylvania, electricity rates have three main components: the charge for generation, which accounts for slightly more than half of the total cost of electricity, plus charges for distribution over local lines and for transmission over high-tension power lines. Relatively small rate hikes to cover distribution and transmission are fairly common.
Last month, PPL asked for permission to increase its distribution charge on Jan. 1, 2008. While the exact amount was not disclosed, the Allentown company promised it would be less than the 7 percent hike that took effect two years ago.
The increase would help cover, among other costs, the expense of expanding an experimental program that could help customers minimize the impact of 2010 electricity prices.
The program involves "time of use" billing, in which customers are charged different rates at different times of the day. The idea is to give people an incentive to use less electricity at those times when demand is highest and supply is stretched thin.
In November, PPL moved one step closer to wide-scale implementation of the program when it became the first electric utility in the country to track the hourly usage of all of its customers -- 1.4 million across the state.