Capital Domes Head to Head: A look at how electricity deregulation will affect Pennsylvania's power prices

Brouillette: Choice and competition, not rate caps, keys to affordable electricity

Pennsylvania's electricity rate caps have kept prices artificially low, preventing competitors from entering the marketplace and consumers from having choices. Now, when rate caps expire in 2010 in PPL territory, most of central Pennsylvania will see an increase in electricity prices.

Of course, government-imposed price controls always distort the delivery of goods and services. So after the initial shock of paying rates closer to the going market price of electricity, Pennsylvanians will see an increase in competition -- and with it, greater choice and better values. It is already happening in pockets of Pennsylvania.

Rate caps expired in western Pennsylvania years ago, and today 20 percent of Duquesne Light customers have switched to other suppliers. The competition has forced Duquesne Light to offer more competitive prices and better services. The result: Electricity consumers are benefitting.

Savings can be seen in other states that embraced competition and got rid of government price controls. Customers shopping for electricity in Maryland are paying close to 2 cents less per kilowatt-hour compared with those who stayed with their default service provider. In Massachusetts, competition saved customers $1.1 billion from 1998 through the end of 2004. Despite rising energy costs, the average rate of electricity offered in Texas's restructured market is only 2.9 percent higher than the inflation-adjusted rate in 2001. The average Texan now can choose from among 28 providers, compared with only four in 2002.

Competition forces companies to serve their customers with the best prices and service, giving consumers more control. While it's true that electricity prices in both monopoly structures and competitive markets have escalated over recent years, that is due to rising costs for generating fuels, not deregulation. Moreover, prices already have begun to drop in competitive markets -- an effect not seen in monopoly delivery systems.

Case in point is PPL's recent announcement of a 30 percent rate hike this January. That increase is largely the result of PPL's decision to buy a significant amount of its energy supply last year when fuel costs were high. A number of companies already have announced their intention to compete for PPL customers, with one, Dominion Retail, guaranteeing a savings of 10 percent on PPL's rates for the first 5,000 customers.

Delaying the expiration of rate caps would only inhibit economic growth from companies looking to invest in Pennsylvania. With rate caps still in place for more than 80 percent of Pennsylvania's ratepayers, 44 companies already are licensed to be competitive generation electricity suppliers.

It's time to end government price controls on electricity and allow Pennsylvanians to make choices once again in a competitive marketplace.

Epstein: Electric deregulation is the great failed experiment

Gov. Tom Ridge predicted that electric competition would lead to job growth, economic expansion and decreased rates.

According to Ridge, "Pennsylvania's national leadership in electric competition continues to bring dramatic savings and economic benefits to Pennsylvanians" (Aug. 4, 2000). The success of electric competition would shave business costs and give employers more money to invest, thereby creating multiplier effects on the state economy. "Competition" also would produce savings that would give consumers more money to spend.

Ridge's secretary of revenue, Robert A. Judge Sr., stated, "We expect electric competition will help create more than 36,000 jobs between 1998 and 2004, and have a major positive impact on our state's economy. And millions of Pennsylvania families and employers continue to save money on their electric bills -- without even lifting a finger."

The Department of Revenue also reported to Ridge and the General Assembly that deregulation would result in greater sales tax and personal income tax collections.

Could the deregulators have gotten it more wrong?

The reality is not so dreamy. Electric utilities are collecting $11.4 billion in stranded costs, increased taxes on ratepayers and dumped customers at record rates.