Rate Caps: Extend or End?

At a recent meeting of the House Republican Policy Committee legislators heard testimony concerning the expiration of electric rate caps. The original Electric Generation Choice and Competition Act focused on creating competition because competition produces innovation and innovation produces greater efficiency and greater efficiency . . . . you get the idea. But a few state politicians are unwilling to trust the free market with Pennsylvania’s electricity. They insist on extending rate caps ignoring the fact that the 2005 rate cap extension solved nothing. Continuing to stall deregulation will only delay an increase in electricity rates.

PECO senior vice-president Lisa Crutchfield explains:

It [extending rate caps] would force us to purchase generation supply at market prices but then sell to our customers at capped rates that are below market price. We would estimate that in three to four months after the end of our transition, we would file for bankruptcy.

Thankfully many legislators understand that expensive electricity is better than no electricity. Phasing in higher rates appears to be a popular solution among lawmakers and power companies including PECO. Meanwhile, the PUC continues to ignore PPL’s own phase-in plan. The proposal introduced in December allows PPL customers could choose to make additional payments before rate caps expire.

There is no simple answer to rising energy prices, but one thing is clear. Deregulation consistently lowers costs, examples include the transportation and telecommunications industries.