Regulators vote against savings for Meadville businesses

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March 18, 2011

By Mary Spicer Meadville Tribune The Meadville Tribune Fri Mar 18, 2011, 07:00 AM EDT

MEADVILLE — A plan that would have allowed a bit of a price break to Penelec customers residing or operating small businesses within the Meadville city limits beginning Jan. 1 has received a thumbs-down from Pennsylvania Public Utility Commission.

According to City Manager Joe Chriest, approximately 4,500 to 5,000 individual customers and small businesses could have benefited from the plan, which would have saved an average residential customer using 750 kilowatt hours of electricity and paying a monthly bill of about $83 approximately $2.57 per month. If the cost of generating the electricity rises, savings would increase accordingly, with residents guaranteed a minimum savings of 6 percent on the cost of generation.

As explained by PUC, municipalities can become “municipal aggregators,” representing their participating residents in procuring electrical power as a group “with the expectation that they will be able to bargain for electrical power on better terms as a group, as opposed to the residents bargaining for power individually.” The municipality then contracts with an electric generation supplier to provide generation supply services to participating residents.

On Oct. 6, 2010, Meadville City Council passed an ordinance that would have led to the designation of FirstEnergy Solutions Corp. of Akron, Ohio, as that supplier. Both Penelec and FES are separate companies owned by First Energy Corp., also of Akron.

At around the same time, Edinboro, Warren and Farrell passed similar ordinances at the urging of FES.

By the end of October, however, the Retail Energy Supply Association, a trade association representing electricity producers and suppliers, and Dominion Retail Inc., an electricity generation supplier, had filed separate petitions with the PUC asking that the ordinances be declared illegal because of a provision in the plan that would have included all residents and businesses unless they specifically filed paperwork to opt out of the plan.

On Nov. 9, 2010, FES filed a petition with the commission requesting confirmation that no PUC approvals are necessary in order for the company to participate in opt-out municipal aggregation programs developed in Crawford, Warren and Mercer counties.

Not likely anytime soon

According to a statement released Thursday, commissioners said “no” to FES, ruling 5-0 that electric generation suppliers “will remain subject to Commission jurisdiction and regulatory authority for consumer protection, licensing and other purposes authorized under the Public Utility Code.”

The commission, according to its statement, is attempting to protect consumers from “slamming,” defined as “a term used to describe the practice of changing a customer’s electric generation supplier without their direct approval.”

The commission ruled that “absent a legislative change to the anti-slamming provision, opt-out aggregation programs must be explicitly approved by the commission, and the commission will approve such programs only in unique or exigent circumstances in its petition demonstrating that the opt-out programs would be in the public interest.”

As for the FES petition, “FES did not present any unique or exigent circumstances in its petition demonstrating that the opt-out programs would be in the public interest. Under the facts that exist at this time, commission approval of an opt-out municipal aggregation program would be an improper and unnecessary abrogation of individual consumer’s rights concerning electricity choice.”

In a separate statement, PUC Chairman Robert F. Powelson went on to explain that while he doesn’t expect municipalities to have expertise in the “often complex and nuanced area” known as public utility law, he expected more from FES.

“Simply put, FES should have sought guidance from the commission before commencing discussions with any municipalities about municipal aggregation programs, not after such efforts were well under way. Had they done so, significant time, effort and use of resources could have been avoided,” Powelson wrote.

“As for the future of municipal aggregation in Pennsylvania,” Powelson continued, “I note that the commission has historically been generally supportive of the concept. As I continue to study the issue and its impact on competitive markets further, however, my views are maturing.”

Noting that he is becoming less convinced of the benefits and increasingly concerned that such programs may actually hinder competition, Powelson expressed his personal belief that legislative efforts to implement municipal aggregation should be tabled pending completion of commission’s statewide investigation into retail electricity markets “to allow further time to study the consequences, both intended and unintended, of municipal aggregation.”

Mary Spicer can be reached at 724-6370 or by e-mail at mspicer@meadvilletribune.com.

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Regulators vote against savings for Meadville businesses

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