As the legislature pushed past its weekend budget deadline, the state’s power industry squared off with Gov. Rendell over energy proposals he says are crucial to keeping electricity prices from skyrocketing as decade-old caps expire in the years ahead.
Dozens of lobbyists representing utilities and power generators were working the Capitol’s anterooms last week, pulling legislators off the floor to urge changes in the package of bills that Rendell calls his “Energy Independence Strategy.”
The fight helped derail efforts to pass a 2008 budget by this weekend’s traditional deadline, as Rendell repeated his threat to hold up the budget unless his energy package was approved.
Power generators such as Exelon Corp., owner of Philadelphia’s Peco Energy, are fighting a provision that would require utilities to give priority to conservation and alternative-energy sources as they seek to meet growing needs for electricity.
Another sticking point is a proposed surcharge on electric bills to fund an $850 million bond issue for investment in conservation, energy efficiency, and development of alternative- and renewable-power sources.
The surcharge, labeled a Systems Benefit Charge, would add one-twentieth of a cent per kilowatt-hour to customers’ bills, or about $5.40 a year for the average household. Administration officials say it should produce about $1 billion a year in energy savings across the state, an estimate that some electric-industry lobbyists question.
Opponents deride the charge as a new tax, a critique that business organizations, Republican political groups, and conservative antitax groups were using to press lawmakers – many elected on “no new taxes” platforms – to oppose it. In recent days, the Pennsylvania Chamber of Business and Industry ramped up the fight with robo-calls and blast e-mails, urging voters to tell their representatives to vote “no on higher taxes.”
“This is a killer,” said Gene Barr, vice president of government affairs for the chamber. “It will have a huge impact on utility rates for energy-intensive businesses.”
The “tax” label clearly concerned some lawmakers who said they were sympathetic to Rendell’s overall goals. Nor were they mollified by its modest scale.
“In my district, the word tax is not exactly something people favor,” said freshman Rep. Mike Vereb (R., Montgomery). “They know once you initiate a tax, it can always be increased.”
Kathleen McGinty, secretary of environmental protection, accused Barr and other opponents of misrepresenting the energy plan’s likely effects. She said the $1 billion a year in savings was a conservative estimate, based largely on studies conducted by Carnegie Mellon University economists and PJM Interconnection, the Valley Forge consortium that manages the region’s electricity grid.
Rendell has promoted his energy plan by arguing that it would simultaneously boost the state’s economy, aid the environment, and reduce dependence on imported fuels. He says it would do so in part by supporting investment in businesses that profit from promoting conservation, energy efficiency, and alternative power sources – everything from solar and wind power to biodiesel fuel.
But it was the package’s effects on electricity markets that drew much of last week’s intense lobbying. Supporters of the package, led by the environmental advocacy group PennFuture, attempted to counter it with their own aggressive campaign.
McGinty said that if rate caps expire – as Peco Energy’s will at the end of 2010 – without Rendell’s plan in place, “we’re almost certainly looking at double- or triple-digit increases overnight in electricity prices. And you don’t have to guess. That’s what’s happened in every place where rate caps have come off.”
John Hanger, PennFuture’s president and a former state utility commissioner, said the package’s focus on conservation was a key to its potential in curbing future price increases.
One provision of House Bill 1201, which is stalled in the House and is the main target of opponents, would require installation of so-called smart meters in every customer’s home or business.
Hanger said the meters would show customers the huge variation in what utilities have to pay for the electricity they deliver, especially the spikes in prices that occur on hot summer afternoons, when a utility might pay 10 times as much or more per kilowatt-hour than during low-demand periods.
“If just 5 percent of users volunteer to turn off their air-conditioners when demand is at a peak, the wholesale price for power could drop 20 percent,” Hanger said.
Hanger said the 100 hottest hours of the year – about 1 percent of all hours – account for 20 percent of the cost of serving residential customers, because generation prices are pegged to the cost of power from the least-efficient plant that has to be switched on to meet demand.
Doug Biden, president of Pennsylvania’s Electric Power Generation Association, said power suppliers were not fighting the smart-meter requirement, although he questioned the need for installing them in all customers’ homes “unless they’re going to require customers to use them.”
Biden said the power companies’ biggest objections to House Bill 1201 centered on its mandate that utilities try to meet growing demand first with conservation and then with power from alternative sources.
“We think that skews market forces,” Biden said. “We don’t have any problem with conservation and alternative energy. We just think they need to compete on an equal footing.”
McGinty said prioritizing conservation would help spare customers from the expense of paying for unneeded power plants and transmission lines. And she said such tools as smart meters would enable customers to recognize and respond to the real costs of generating power.
“What the governor is doing, precisely, is enabling the free market to work,” McGinty said.
By Jeff Gelles and Amy Worden
Inquirer Staff Writers
2 June 2007
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