Eric Epstein: Electric fantasyland led to higher rates, higher taxes and more terminations

On Aug. 4, 2000, Republican Gov. Tom Ridge announced that electric competition would lead to job growth, economic expansion and decreased rates. According to Ridge, “Pennsylvania’s national leadership in electric competition continues to bring dramatic savings and economic benefits to Pennsylvanians.”

The Department of Revenue rolled out the pompoms and released “Electricity Generation Customer Choice and Competition,” which predicted a free market utopia. Secretary of Revenue Robert A. Judge Sr. forecast that reductions in retail electricity prices would lead to the following economic impacts in Pennsylvania by 2004:

• the real gross state product will be $1.9 billion higher;

• overall employment will increase by 36,400 full-time and part-time jobs;

• nominal personal income will increase by $1.4 billion;

• the price index will decrease by .47%; and

• the population will increase by 51,400 people, as workers are attracted to job opportunities in Pennsylvania.

This electric fantasyland never materialized. To the contrary, electric companies collected $11.4 billion in “stranded costs” (mostly for uneconomical nuclear plants,) shifted taxes to municipalities and school districts, and dumped customers at record rates. Two decades later, we should not be surprised by impacts of this “planned train wreck.”

In 2008 a study published by Carnegie Mellon University’s Electricity Industry Center found, “On average, power users in restructured states pay 2 to 3 cents per kilowatt hour more than customers in states that didn’t restructure.”

The same year, in a letter to Democratic Gov. Ed Rendell, the Office of Consumer Advocate (OCA) predicted increases for customers after rate caps were removed. The OCA’s estimated significant hikes across the state: PECO by 8%, Met Ed by 54% and West Penn by 63%. In 2010, PPL cautioned its customers rates could increase by over 34%.

Warning flares were sent up and ignored by both parties. It turns out that the “doomsday predictions” became a harsh reality in 2022.

PPL sold its generating assets to Talen Energy. Talen jacked up electric rates by 38%, and filed for bankruptcy this year. West Penn’s “price to compare” will increase by 45%. There is no relief for gas customers, either. UGI increased its rates by 46%.

PECO generation’s rates may appear to rising “modestly” by only 8%, but the company (formerly owned by Exelon) pumped up distribution rates by 13%.

Distribution rates — or your “line and wire” charges — have steadily increased since 2012 when Republican Gov. Tom Corbett signed Act 11 into law. The “Distribution System Improvement Charge (“DISC”) is an automatic increase baked into your bill, and “revised quarterly” so utilities can keep up with unprofitable operation and maintenance costs.

Property taxes also went up for communities near power plants. Deregulation shifted power plants back to the local tax rolls under the assumption that utilities would pay at least the same amount as they did under real estate assessments. However, by 2004 homeowners were paying an average of 30% more in property taxes than they did in 1997. Electric utility companies were paying 85% less in taxes on their plants, down from about $120 million annually to about $20 million.

Uncollectible accounts were supposed to decrease with the price of electric, but the reality is far grimmer. On Nov. 19, 2004 — the last day of a “lame duck session” — the Legislature passed “The Responsible Utility Customer Protection Act” at the behest of the energy industry. This legislation, passed in secrecy and without public comment, became Act 201. Prior to this legislation, the Public Utility Commission prevented most winter shut-offs between November through March.

Consumers continue to be left in the dark, and without heat in the winter. The total number of electric terminations skyrocketed last year from 14,146 to 35,189, or a 149% increase. Gas terminations heated up from 6,397 to 12,423 for a 94% rise during covid.

The promise of deregulation leading to an economic boom and lower prices didn’t pan out. “Rate shock” impacts all consumers regardless of their party affiliation, and was set in motion long before Joe Biden was elected president or Russia invaded the Ukraine. There’s enough guilt to go around.

There is no go-back button: Reregulation is not an option, and the utilities that collected $11.4 billion in stranded costs cashed out, sold out or moved out. Policy makers need to be held accountable for “rate shock,” higher tax rates and winter terminations. Now would be a good time to ask gubernatorial and legislative candidates how they plan to address these issues.

Eric Epstein was chairman of Three Mile Island Alert Inc., a safe-energy organization based in Harrisburg, and founded in 1977.