PA PUC Blasts GPU for 'Alarming Customers'
John M. Quain, chairman of the Pennsylvania Public Utility Commission
(PUC), blasted GPU Energy earlier this month for "deliberately alarming
consumers and elected officials" by suggesting a crisis like the one
in California could occur in Pennsylvania.
"I am outraged that GPU would even hint that a similar energy crisis
could happen to Pennsylvania," said Quain. "This appears to be
a thinly veiled attempt to influence a decision pending before the PUC.
"I assure consumers and legislators that what is happening in California
will not happen in our state," he said. "GPU has an economic
problem, not a supply problem."
GPU warned that its wholesale power costs were escalating rapidly while
its retail rates remain capped. GPU in November petitioned the PUC for
the right to collect from customers in future years more than $82 million
in projected losses from purchasing electricity. On Jan. 19 it told the
PUC its latest estimates show a 2001 supply loss of $145 million (pre-tax)
because a significant number of customers have been returning to the utility
in its customer choice pilot resulting in an increased load of 175 MW.
GPU is the supplier of last resort (SLR) in its customer choice program
and it is seeking changes to its SLR role. If all shopping customers were
to return for the full year to the utility, its supply losses could rocket
to $250 million (pre-tax), the company said. Under GPU's 1998 restructuring
settlement, generation rates for customers are capped through 2010 for
Met-Ed customers and through 2009 for Penelec customers. The two companies
are subsidiaries of GPU.
The utility said that the California experience demonstrates that "substantial
impairment of earnings and a substantial loss of cash flow will most assuredly
follow if wholesale supply costs continue to skyrocket out of control.
However, the PUC sharply criticized the utility for blaming wholesale market
conditions, when, in fact, the losses resulted from GPU's own business
decisions. Last week, the PUC deferred a decision on the issue, combining
it with its review of GPU's merger with First Energy Corp.
"The decision to divest their generation was made in their boardroom,"
said Kevin Cadden, a spokesman for the PUC. "The decision not to enter
into long-term power contracts with suppliers was made in their boardroom.
These decisions were not made by the PUC."
In recent weeks Quain has stressed that three critical factors separate
Pennsylvania from California:
1) Pennsylvania produces more power than it consumes, is a net exporter
of electricity and the second largest producer of electricity in the U.S.
2) Pennsylvania did not require utilities to sell their generation plants
as a part of restructuring as California did. Nearly all of Pennsylvania's
electric utilities own their own generating plants. GPU chose to sell all
3) Pennsylvania does not prevent utilities from entering into long-term
power contracts with suppliers. GPU chose not to enter into a sufficient
number of these contracts.
"The request for relief will be decided on the basis of the record
and law developed in the pending proceeding, and will not be swayed by
unfounded comparisons to California," Cadden said.
The PUC said Pennsylvania's electric choice program has saved customers
nearly $2.8 billion to date in guaranteed rate cuts and savings. More than
550,000 customers have selected an alternative electric supplier under
Meanwhile, GPU is awaiting a PUC ruling on its merger with FirstEnergy,
which announced plans last August to buy GPU for $4.5 billion in cash and
common stock. FirstEnergy also would absorb $7.4 billion of GPU's preferred
stock and debt (see NGI, Aug. 14, 2000).