Price of Electricity

Posted: February 4, 2007

All customer classes are benefiting from the declining prices of PA's electricity.

Residential electricity prices are down by 13 to 47 percent in constant dollars from 1991 to 2006 for more than five million PA customers living in the seven largest electric service territories in the Commonwealth. All customer classes are benefiting from the declining prices of PA's electricity. For the first time in decades, the average price of electricity in July 2006 paid by all PA customer classes – residential, commercial and industrial - fell below the national average price of electricity.

Electricity rates are going down while the prices of other forms of energy – oil, natural gas, propane, gasoline, coal and even firewood – are sharply escalating. Today electricity is really the only energy bargain left in PA.

The declining electricity prices in PA are clearly linked to the deregulation of electricity generation that resulted in an increase in competition in the generation and marketing of electricity. One of the controversial aspects of deregulation of electricity generation has been the charges included on every bill for “transition costs” or “stranded investments.” These charges have sometimes been as high as 40 percent of the total bill. These charges were levied to enable the electricity companies to establish rate caps on the price of electricity and to compensate them for their long-term commitments that were made prior to deregulation.

But these rate caps have expired or will be expiring soon. The table below lists the expiration status for each of the 11 investor-owned electric utility companies in PA. When the rate caps expire, then the transition costs and stranded investments will no longer be charged to you. What happens to the price of electricity when there are no more rate caps? If I knew, I would be living the life of luxury on some Caribbean island. Some have suggested that the prices for electricity will go through the roof at that point. Others have suggested only a modest increase because the forces of supply and demand competition will protect us from exorbitant price increases. I personally believe that forces of competition will prevent electricity prices from escalating much higher than what is justified based on price increases for the energy required to generate the electricity.

UGI Utilities Inc. - Electric Div. Expired
Pike County Light and Power Co. Expired
Citizens Electric of Lewisburg Expired
Wellsboro Electric Co. Expired
Duquesne Light Co. Expired
Pennsylvania Power Co. Expired
PPL Electric Utilities, Inc. Dec. 31, 2009
Metropolitan Edison Co. Dec. 31, 2010
PECO Energy Co. Dec. 31, 2010
Pennsylvania Electric Co. Dec. 31, 2010
West Penn Power Co. Dec. 31, 2010

The best way to prepare for the uncertainties that lie ahead is to utilize electricity (and all other forms of energy) in an efficient manner. I refer you to the web site where you can find numerous links dealing with various energy efficiency issues for the farm and home. Additional information will soon be posted on the web site and I welcome your inputs on what new topics should be included on the web site.
Dennis Buffington
Dept. of Agricultural and Biological Engineering