2008-11-13 / Local & State

Pa. Court Says Utilities Cannot Break Rate Caps

By Marc Levy ASSOCIATED PRESS WRITER

HARRISBURG, Pa. (AP) - Two Pennsylvania utilities cannot raise electric rates they charge to customers, a move that would break deregulation-era electric-rate caps they agreed to a decade ago, a state judge ruled Friday.

Commonwealth Court Judge Rochelle S. Friedman upheld a January 2007 decision by state utility regulators to deny the request by Metropolitan Edison Co. and Pennsylvania Electric Co.

The utilities had argued that they should be able to raise customers' retail electric rates to reflect the increasing price of wholesale electricity. But Friedman wrote that the utilities chose not to sign long-term contracts that would have locked in all of their wholesale electricity costs over the life of the rate caps.

In 2006, the companies, both subsidiaries of Akron, Ohio-based FirstEnergy Corp., asked regulators to let them begin increasing electric rates, instead of waiting until 2011, when the utilities' rate caps expire.

The state's utility consumer advocate, Sonny Popowsky, said the companies would have been able to bill their customers another $2 billion plus over four years.

"This is an extremely important decision for MetEd and PennElec customers because they would have lost four years of benefits from the rate caps we all agreed upon,'' Popowsky said.

The companies serve a combined 1.1 million electric customers scattered across more than 40 counties in Pennsylvania.

A FirstEnergy spokesman, Scott Surgeoner, said he did not know whether the company will appeal. The utility's rate caps expire Jan. 1, 2011, allowing the company to begin passing on the full price of electricity supplied by the wholesale market.

Popowsky has estimated that bills for MetEd customers will balloon by 54 percent when the cap expires, while PennElec customers will have to absorb a 50 percent increase. Surgeoner said the utilities have not released their own estimates because they have not yet purchased the electricity that they will deliver in 2011.

As part of Pennsylvania's deregulation of the power industry, utilities had to cap electric rates at 1990s levels while they billed customers $14 billion to cover power plant costs. About 85 percent of Pennsylvania's 5 million-plus electric customers are living under rate caps.

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