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Discount Rates Urge Restructuring in Penn.

Fortnightly Magazine - July 15 1996

The Pennsylvania Public Utility Commission (PUC) has authorized Duquesne Light Co. to expand its economic development rate initiatives to include small industrial customers. The new rate rider provides a five-year discount on demand charges on a maximum of 100 kilowatts (Kw) for new or existing customers smaller than 100 Kw. If the utility's service territory is to recover from the steel industry's devastating downturn, the PUC argued, Duquesne must be able to offer a competitive rate to keep industrial operations of all sizes. The new program complements the utility's successful program for larger industrial customers. The PUC also approved by separate order a special contract negotiated by Duquesne with a large industrial customer that had threatened to build its own cogeneration facility.

In a third case, the PUC approved a special discount contract for service provided by PECO Energy Co. to one of its large industrial refinery customers, Sun Co., Inc. The contract was negotiated under the utility's existing special-contract tariff, which requires the utility to show that the discount customer is considering competitive alternatives to its firm-service offerings. According to the PUC, the refinery company had expressed concern over reliability and cost of service at one of its facilities that straddled the Pennsylvania/Delaware border. It said that the company had considered switching to a Delaware utility, Delmarva Power and Light Co., for its power needs.

Commissioner John Hanger entered a separate statement in all three proceedings, noting that the discounts represent the "first wave of stranded investment" in the state. He explained that in all three cases the customers are not being asked to pay a portion of the difference between the costs embedded in rates and competitive market pricing. Noting that "limited choice" had given each customer bargaining power, Hangar said that the "challenge for this commission is to give all customers choice, not just the lucky few." Noting that it was not possible to extend the discount to all customer classes, Hangar said that the only fair and effective response to competitive generation is a "fundamental restructuring that gives all customers meaningful choice." Pennsylvania Public Utility Commission v. Duquesne Light Co., R-00963610, April 25, 1996 (Pa.P.U.C.); Re Duquesne Light Co., R-00963591, April 25, 1996 (Pa.P.U.C.); Pennsylvania Public Utility Commission v. PECO Energy Co., R-00963621, April 25, 1996 (Pa.P.U.C.). t

Phillip S. Cross is an associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.

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