Currently, the electrical utilities are undergoing deregulation (some call it reregulation) in order to provide retail customers direct access to the electrical generation market. This has created a whole new set of "buzzwords" and acronyms for the consumer to learn in order to follow the activities as they unfold. These have been organized into an Electric Retail Access Glossary for easy referral.

Governor Ridge was a strong advocate for electric competition reform providing Pennsylvania with another opportunity to become a leader among states and a competitor among nations.

Enabling legislation:

• Federal:
  • 1978 Public Utilities Regulatory Policies Act (PURPA)
  • 1992 Energy Policy Act
  • 1996 Federal Energy Regulatory Commission (FERC) Order 888
  • Federal Energy Regulatory Commission (FERC) Order 889
• Pennsylvania Consolidated Statutes:
  • HOUSE BILL 1509
    • Electricity Generation Customer Choice and Competition Act (summary)
    • Electricity Generation Choice for Customers of Electric Cooperatives Act (summary)

Retail Access Pilot Programs

Part of the phase-in plan from a regulated to a non-regulated electric generation market incorporates Retail Access Pilot Programs. Pilot Programs are to be a minimum term of one year, involve approximately 5% of peak load in each customer class, unbundle electric service rates, include plan to recover stranded costs, and limited to PAPUC licensed electric generation suppliers.

The PAPUC met on May 8,1997 and issued responses to the proposed Retail Access Pilot Programs. The Commission's responses specifically address deficiencies, and endeavor to ensure that they are meaningful in preparing customers for electric competition which was scheduled to begin January 1, 1999 in Pennsylvania. Many of the pilot programs offered minimal or no economic incentive to participate, and imposed complexities and restrictions to both customers and competitive suppliers that would discourage participation. The limited number of license applications from potential competitive suppliers may have indicated a general belief that the pilot programs did not allow for meaningful competition.

The Commission's orders required the utilities to revise and resubmit their pilot programs so that they can be "conducted in a meaningful and realistic way" and "provide information useful in the transition to a competitive market for electricity." The Commission felt the revised Pilot Programs would result in savings of up to 10 to 15 percent for consumers willing to shop suppliers. One of the most important provisions is the requirement that utilities fully unbundle generation from transmission and distribution. Furthermore, a "market rate" of $0.03/kwh will be subtracted from the generation charge to determine a stranded cost component of generation, and the allowed recovery of generation-related stranded costs will be limited to 75%.

Some in the industry said they were concerned the commission formula would give consumers an artificial expectation of savings they would see when actual competition is put in place.

The PAPUC met on August 21,1997 and issued Pilot Program Opinion, and issued implementation orders to each utility August 29, 1997. The following table summarizes this ruling:

• Residential and Commercial:
  • proposed generation credit
    $0.027/kwh delivered to PJM
    $0.021/kwh delivered to West Penn, Penn Power, Duquesne
  • final generation credit $0.03/kwh state wide
  • customer participation credit (CPC) of 13% (8% for UGI)
• Industrial:
  • proposed generation credit
    $0.027/kwh delivered to PJM
    $0.024/kwh delivered to West Penn, Penn Power, Duquesne
  • final generation credit as proposed
  • customer participation credit (CPC) of 10% (8% for UGI)

The Electric Distribution Company (EDC) Pilot Enrollment Schedule defines dates for each of the utilities.

Some of the key milestones are:

• Commencement of the flow of competitive power in pilot programs - November 1, 1997
• Final approval of utility restructuring plans - Summer 1998
• Commencement of first phase (first 1/3) of retail competition - January 1999