As regulators continue to investigate industrywide restructuring as an answer to regional electric rate disparities and calls from large consumers for price reductions, the trend of dealing with...
Pennsylvania's Electric Restructuring: How the View Changed
An insider recounts the twists and turns that led to a new state law and new rights for the state's electric consumers. On Dec. 3, 1996, Gov. Tom Ridge signed into law Pennsylvania's Electricity Generation Customer Choice and Competition Act (em a historic statute that will introduce competition in the retail market among suppliers of electric generation. The act passed primarily because of strong leadership from the governor and others. By signing the act, the governor confounded those who thought Pennsylvania would not support retail electric competition or would do so reluctantly and belatedly. Instead, Pennsylvania became the fourth state to pass a statute giving the power of choice to all retail consumers of electricity.
It is no simple matter to convince a state government to abandon monopoly regulation of electric generation. Restructuring the electric industry is a battle of ideas (em a battle among interests. Those arguing for retail competition must demonstrate that competition will help businesses and families and will prove superior to current regulatory practice.
The first step lies in developing a standard presentation that can explain three different things: 1) the past record of monopoly regulation, 2) the principal issues now involved, and 3) how retail competition would work in practice. Yet, even a good idea like retail electric competition may not survive in the political arena, even though it may claim a host of effective advocates.
Already the act holds changes in store for Pennsylvania's electric industry. By virtue of the act's requirements for pilot projects, by the end of 1997 Pennsylvania may lay claim to the largest competitive retail electric market in the country, with more than 1,000 MW of demand open to direct-access competition.
In terms of specifics, the act requires all electric public utilities to file a restructuring petition with the Pennsylvania Public Utility Commission between April 1, 1997 and Sept. 30, 1997. Starting Jan. 1, 1999, one-third of each customer class must be allowed to choose an alternate generation supplier. Another one-third of each customer class may choose an alternate supplier by Jan. 1, 2000. The statute gives all customers the power of choice by Jan. 1, 2001.
The act also deals with other restructuring issues, including: stranded investment, securitization, licensing of new entrants, market power, customer education, rural electric cooperatives, municipal utilities, tax revenues, low-income protections, reliability, customer service requirements and more.
Nevertheless, while the new law may be rich in substance (which partially explains why it passed), the story of how Pennsylvania embraced competition offers lessons as electric restructuring proceeds across the country. To do this, I begin the story at its end.
An incredible array of interests gathered in the governor's reception room to watch the governor sign the act into law. Nearly all of those gathered, however, had opposed retail electric competition three years earlier. Even less than a year before the signing, many in the room had attacked the idea of giving product choice to retail customers. As the ink dried on the legislation, only a determined few continued to oppose it.
I say "few," because