September 18, 2008

Citizen Power Calls on State Government to Determine Why Electricity Deregulation Has Failed and to Develop Long-Term Corrections to Avoid Unwarranted Rate Increases

PITTSBURGH, Sept. 18 /PRNewswire/ -- In a letter to key legislators, regional energy advocacy organization Citizen Power has requested the Pennsylvania General Assembly to appropriate funds for an independent study of the Electric Choice program. Electricity deregulation is now 10 years old and there are serious questions about its success. In addition, there is increasing concern about the potential impact of higher electricity rates once rate caps come off at the end of 2010. Yet, there has never been a study to determine why the program is not working.

Citizen Power has also asked Governor Rendell to urge the Legislature to fund this study. In a September 9 appearance before the House Environmental Resources and Energy Committee the Governor made a strong case that electricity deregulation is not working. He even offered two free tickets to a 76ers playoff game to anyone who can show where competition exists. However, when asked if the Legislature should consider a return to regulation, the Governor said that should be a consideration, but "not now."

Citizen Power believes the time to consider a return to cost of service regulation is past due. "There is absolutely no reason to wait," said David Hughes, executive director of Citizen Power. "We can enact immediate proposals and at the same time take the first look at why deregulation isn't working. After 10 years of failure and possible rate increases coming, it's amazing that no one is talking about the real cause of the problem," Hughes continued.

Deregulation was supposed to lead to competition where electricity customers would have choices. "The quid pro quo was we pay the utilities their $12 billion in stranded costs and we get rate reductions. We paid the $12 billion but any rate reductions were infinitesimal and temporary. Now we are faced with unregulated monopolies that will be able to charge whatever they want when the caps come off," Hughes said.

There are many examples of crises caused by deregulation, including the increase in the price of gasoline and the historic meltdown on Wall Street. A number of proposals have been put forward to deal with potential electricity price increases, but they all ignore the elephant in the room, i.e., deregulation. One proposal is to extend the rate caps. Citizen Power supports a rate cap extension, but only if the extension period is used to make necessary structural corrections.

In addition, Citizen Power is opposed to a phasing-in of rate increases. "Everyone says there are going to be rate increases. Why should there be? Utilities are making record profits and there's a 60% excess generating capacity in Pennsylvania. We should be getting rate reductions," Hughes said.

Citizen Power has been opposed to deregulation since it was first proposed. After 10 years it is clear that our concerns are warranted. "There are powerful interests that do not want to return to cost of service regulation. We understand they don't want oversight. But the least the Governor and the Legislature can do is hire an independent expert to study why the Customer Choice program isn't working and make recommendations about how to resolve the problem," Hughes said.

Citizen Power does not believe retail electricity competition will ever develop. "Electricity is not a commodity, it's a public service. It simply doesn't lend itself to the volatility of the marketplace. We believe the verdict is in on deregulation, but conducting an independent study will determine if Citizen Power is correct," Hughes said.

Citizen Power is urging the Legislature to fund this study now. "There is no reason to wait. The situation in the financial markets shows what inaction leads to. Given what we are faced with, waiting any longer would be irresponsible," concluded Hughes.

Citizen Power

CONTACT: David Hughes of Citizen Power, +1-412-421-6072 ext. 213

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