2008-10-16 / Local & State

Pa. Legislature OKs Electricity Conservation Bill

By MARC LEVY ASSOCIATED PRESS WRITER

HARRISBURG, Pa. (AP) - A heavily lobbied bill to cut electricity prices and encourage energy conservation easily passed the state Legislature last Wednesday as lawmakers rushed to ease the pain of disappearing rate caps for a growing number of Pennsylvanians.

The bill would require utilities to follow new electricity-buying rules and install millions of "smart'' meters, making Pennsylvania the first state to mandate the devices, according to state officials. By 2011, utilities also would have to find ways to reduce overall electricity consumption, although the bill allows them to decide how to achieve that goal.

The bill has been hung up for well over a year as lawmakers sought common ground between consumer advocates, the utilities and Gov. Ed Rendell, who first proposed the legislation in early 2007. On Wednesday, the Senate approved the measure, 47-3, and several hours later the House gave its approval, 186-4, as the chambers rushed to finish business on their last voting day before the Nov. 4 election.

The bill goes to Rendell, who said he plans to sign it.

"This energy bill puts Pennsylvania right at the forefront of the nation in conservation,'' Rendell told reporters.

Backers said the provisions will save people money as decade-old rate caps for the majority of Pennsylvanians expire over the next 27 months, allowing utilities to collect the full cost of the wholesale power they buy. Rendell said the state's 5 million-plus electricity customers should see more than $500 million a year in savings starting in 2013.

The sweeping bill also would impose fines up to $20 million against utilities caught manipulating the price of electricity and allow the Public Utility Commission to reorganize its structure to adjust to the deregulated electricity markets.

Late Tuesday, unable to break utility opposition, senators dropped a provision to require the companies to reduce their rates to reflect savings which they predicted when their industry was deregulated in 1996, but which never materialized.

When the caps do expire, the impact of the increases - anticipated to be between 20 and 63 percent, depending on the utility territory - could easily mean hundreds of dollars annually in higher bills for each household and small business.

Under the bill, utilities would have to show state regulators that they are seeking out the lowest-cost electricity to deliver to ratepayers. As part of that, the utilities would be able to buy electricity in contracts lasting up to 20 years from power providers as a hedge against unpredictable wholesale market prices.

Proponents, including the state's utility consumer advocate, Sonny Popowsky, said they believe that formula will stabilize electric bills and potentially spur construction of new power sources that would add to supply while lowering wholesale prices.

However, utility officials questioned whether buying in long-term contracts was wise, given the potential that a volatile wholesale market price can drop, as well as rise.

"We'll have to look at it a couple years from now and ascertain what it did,'' said J. Michael Love, president and CEO of the Energy Association of Pennsylvania, an industry group for the state's electric and gas utilities.

Under the new conservation rules, utilities would have to cut annual electricity usage at least 1 percent by May 31, 2011, based on usage estimates made by state regulators. By May 31, 2013, the total reduction would rise to at least 3 percent while utilities would have to slash 4.5 percent of electricity usage during the 100 highest-use hours of the year, when electricity is at its most expensive.

Utilities can bill ratepayers for the cost of their conservation efforts.

In addition, many more customers would receive "smart'' power meters that track how much electricity flows into a home in real time, allowing utilities to better respond to outages and offer timebased alternatives to the average monthly rate that they traditionally charge.

Under the bill, utilities would have to provide a smart meter to whomever requests one, install one in all new construction and swap one for any meter that is at least 15 years old.

While major industrial and commercial ratepayers have operated on time-based rates for years, the concept of trying to shift electricity use to periods when fluctuating wholesale electric prices are lowest remains relatively foreign to residential users.

The utilities would be able to charge consumers for the cost of the smart meter, which can vary - about $200 - depending on the kind. The most advanced ones allow the utility and the customer to gauge usage and cost immediately, instead of once a month after a meter reader makes the rounds.

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