"The FERC encourages competition and market efficiency"

"PP&L will be the energy supplier of choice" (1993)

"New electric sale rules to help consumers" (1996)

"Failure to understand the details of group-buying have resulted in higher energy prices for a number of facilities"

"California messes up" (WSJ)

"The market for power is evolving - we're learning"

"BGE BILL TO INCREASE $743" (3/06!)

As a consumer (residential, commercial, industrial), your #1 concern at this point in time is the impending expiration on 12/31/09 of PPL rate caps in PA.  There is a lot of evidence that consumers are experiencing rate shock and anti-restructuring sentiment is high.  Local disparities are getting larger (e.g. MD v. WV).  Delaware and Connecticut are also seeing major planned increases.  Current intelligence suggests that your bill will go up at least 70% in 2010.

Demand side initiatives are great if you can shed load.  But if you are a school, do you tell the professors not to teach?  Do you move class to midnight to avoid peak hours?  Demand control is a fancy term that means shut it off.

Deregulation was born of a simple concept, namely that monopolies are bad.  Utilities were born of another simple concept, namely that a large central plant is more efficient than hundreds of smaller plants scattered around the service territory.  Do you remember when 40+ companies were beating down your door to sell electricity?  How many are there today?

T4's Current Opinion:  None of the utilities seem intent on issuing a statement along the lines of "deregulation was a flawed concept" and/or the LMP pricing model of the PJM favors our shareholders, not consumers.  When large consumers seriously float the idea of building their own power plants to serve their own loads, then the utility model is broken.  I have to go back to the oh-so-simple California idea that started this mess, namely that they would not build any new plants and just import what they need from the East.  PPL blaming fuel cost is not the main driver.  Ask them why they price their output from their plants at different hourly rates.  Does the cost to produce power at a base-loaded plant differ based on the time-of-day?  Of course not!  They're holding out for the profit that comes when insufficient supply is available for demand.   The entire for-profit vs. public interest/public utility model needs adjustment.  Competition was supposed to LOWER prices to the consumer.  Why did utilities initially oppose it and now embrace it? 

T4's Opinion on the background of this mess:  The margins on power sales were always razor-thin.  Electricity still can't be stored; it's essentially a real-time supply-demand matched commodity.  Deregulation was born of FERC Orders 888/889, which were intended to bring more efficiency and lower-cost service to consumers by opening access to interstate transmission lines.  The deregulation push was driven by California, where electric rates were among the highest in the country.  Personally, I believe the concept was simply that CA would import low cost power from adjacent states and not have to build expensive new generation.  Soon thereafter, Enron purchased the old Portland General Electric Company. The MBA's beat the regulators...if you own the turnpike, you can allow anybody to drive on it, but you also get to charge what you want.  New England States also jumped on the retail pilot programs early because they had the highest electric rates in the country and saw that CA was looking to save a bundle.  Who wouldn't want cheaper power?  Deregulation spawned unbundling, which led to the new model of power + transmission + distribution + stranded cost recovery.  The FERC was focused on national issues and stayed out of the initiatives from individual States.  Marketers were making a ton of $ by doing what they do best - grabbing market share.  And then came the Enron debacle...

We all know what happened next

The PJM controls the flow of electricity in our area.  For over half a century, the lights were kept on by this silent quasi-utility entity that monitored supply and demand and kept them balanced.  Some very smart capitalists twisted the economic definition of monopoly and applied it to a system that was cobbled together to ensure a safe & reliable electric supply.  Utilities always balanced the books at the end of the  month and that was that.  It wasn't too long before utilities recognized that owning the turnpike would be a gold mine.  Plus, the consumer was going to pay them for all of the "stranded cost" they incurred to build them in the first place.  And finally, low cost providers could now send their product to the higher cost areas and actually make more money because the formerly regulated turnpike tolls were now open to change.

Soon the rate caps that looked so great in the late 1990's are set to expire.  We've already had a taste of what's to come when PPL was granted a distribution rate increase a few years back.