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State PUC Approves Allegheny Power’s New Rate Plan

July 19, 2008

By Rick Stouffer, The Pittsburgh Tribune-Review

Jul. 19–Allegheny Power won preliminary approval this week from the state Public Utility Commission for its plan to purchase electricity at lower rates following the expiration of caps on power rates in 2011.

“We’re very encouraged that the PUC generally agrees with the plan we put in place for power procurement, and with the mitigating rates plan,” said Doug Colafella, spokesman for Allegheny Power’s parent, Greensburg-based Allegheny Energy Inc.

The plan includes buying power using 12-, 17-, and 29-month contracts and through purchases on the spot market — all designed to help mitigate price spikes in a competitive power market.

Energy prices have been trending upward the last few years. Coal — Allegheny Power’s primary fuel source for generating power — is selling on the spot market at about $138 a ton, more than double the price of $55.25 a ton in December.

State Rep. Camille “Bud” George, D-Clearfield County, who has publicly stated he believes Allegheny Power rates will jump 63 percent on Jan. 1, 2011, will hold public hearings Tuesday in Monroeville on the price increase issue.

Last year, average electric rates without caps jumped 46.7 percent for Penn Power customers north of Pittsburgh. Average bills for Penn Power customers rose to $105.85 from $72.15 in 2006.

Allegheny Power supplies electricity to 703,000 customers in Pennsylvania, including Westmoreland County and other counties north, east and south of Pittsburgh.

The Public Utility Commission this week conducted a public forum on how the utility should acquire power, using findings from Allegheny Power’s October petition for approval of its customer service plan, plus an administrative law judge’s recommendations on the plan rendered in May.

Default electricity service is provided by Allegheny Power to its customers who don’t select an alternative power provider. The utility is barred by state law from buying power from sister generating company Allegheny Energy Supply LLC without going through a competitive bidding process. Both companies are units of Allegheny Energy.

The new plan includes an option that would allow customers to defer portions of a rate increase if it is greater than 25 percent for as long as three years.

In 2005, Allegheny Power and the Public Utility Commission agreed to phase in a series of rate increases over five years in anticipation of the move to unregulated electricity prices after 2010. The increases were designed to help ease the transition to market-based power rates. That plan was related to the state’s 1996 deregulation of the electricity industry.

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