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Picking Power In Pennsylvania-first Of Three Articles On Electric Utility Deregulation In Pennsylvania

  The attendant at the Pearly Gates is handing the new entrant his orientation packet, concluding with a brochure describing where he would be getting his electricity.

  “Don’t I get to choose an electricity supplier?” he asks.

  The gatekeeper responds, “Where do you think you are? Pennsylvania?”

  That scene ran as a commercial on television in Pennsylvania last year to let people in the state know that a new law had gone into effect. The law lets consumers choose who generates the electricity they buy, ending electric utility monopolies.

  Pennsylvania was not the first state to deregulate electric utilities. Some 22 states have done so. But Pennsylvania has some of the most active results of restructuring. In 1999, the first year of the deregulation law, more than 500,000 consumers changed their electricity supplier, saving $700 million.

  “This has forced everyone to rethink how they do business and to do it better,” says Nora Mead Brownell, one of Pennsylvania’s Public Utility commissioners. “There have been benefits to customers not only in terms of price, but in investment in technology.”

  Not everything is ideal, however. Customers of rural electric cooperatives don’t have a choice because no utility has wanted to compete in those service territories.

  “You don’t have to choose an electric supplier and they don’t have to choose you,” says Perry Stambaugh, director of communications for the Pennsylvania Rural Electric Association.

  Kentucky has not restructured its electric utility industry. Two years ago the legislature authorized a task force to study the issue and report back before its 2000 session. In December the task force recommended that since Kentucky has some of the lowest electric rates in the nation, restructuring could be a risky step right now. It suggested that Kentucky monitor developments in other states, such as Pennsylvania. This spring the legislature agreed and voted to continue the study, asking for a second report before the 2002 legislative session.

  Pennsylvania is not Kentucky, of course, but that state’s experience could offer some lessons as Kentucky weighs the pros and cons of electric utility restructuring.

  Pennsylvania has a lot of people served by electric co-ops, like Kentucky. But among the differences between the two states are the electric rates. While Kentucky’s rates are well below the national average, Pennsylvania consumers pay more than the national average. Those higher rates were a major force in the state’s adoption of electricity deregulation. Industrial utility customers were especially aggressive at lobbying for more competition.

  On balance, while Pennsylvanians seem pleased with how deregulation is working, there have been snags. When customer choice first went into effect, some utilities were overwhelmed with phone calls and some customers fell through the cracks in the billing system, their names disappearing as utility customers.

  But many have taken advantage of their new ability to shop for an electric supplier. Typically a residential customer would get a list of licensed electricity suppliers, or could go shopping on the Internet, for savings of anywhere from a few cents to $100 a year. And there are other offers, including “green power,” said to be generated in ways that don’t harm the environment.

  For the future, Pennsylvanians expect more competition. The first round focused on larger-ticket industrial customers. The next targets may be smaller businesses, and possibly someday, people who live in rural areas.

  And there will be efforts to refine the rules. Brownell says Pennsylvania’s deregulation effort could benefit from federal legislation that would coordinate efforts among states and provide for a unified, national grid of electric lines. 

  But she says the huge amount of work and planning paid off in a system that she believes will give Pennsylvanians better service and a better price. 

Next month: Why Pennsylvania co-op customers don’t have a choice.

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