Public Utility Commission member Tyrone Christy last week came closer than any other high-ranking state official to declaring electric competition to be a fraud.
In case you've forgotten, electric competition was born in the mid-1990s, fathered by several academic theorists (kind of like the three potential fathers in the new film "Mamma Mia!", but not nearly as funny) and midwifed by the corrupt Texas corporation Enron, especially in Pennsylvania. Ken Lay himself called on Gov. Tom Ridge in Harrisburg to press his case, and for a good measure had his friend George W. Bush, then governor of Texas, phone Ridge to tell him Enron was okay. Fishy? You be the judge. Ridge's papers on the birth of electric competition in Pennsylvania are stored at taxpayer expense in the State Archives, but are locked away at his demand for around 25 years (Gov. Casey's, by contrast, opened almost immediately). The gatekeeper is Glen Thomas, his former aide and PUC chairman. Journalists need not apply, and the state's new Open Records Act, another bad joke, specifically exempts records stored in the Archives.
Electric competition seemed like a good idea in 1996. Consumers in Pennsylvania were struggling under ever-rising electric rates in the 1990s. In many cases, these were due to the soaring cost of nuclear plants, especially Philadelphia Electric's Limerick plant. People of good intelligence believed that if only a free market for electricity could be created in place of regulated monopolies, power prices would fall dramatically. It made sense in Economics 101, but apparently not in the real world. In fact, prices have gone up sharply. The lowest estimate of what Pennsylvania's will pay after the end of rate caps in 2009 and 2010 is about 35 percent higher than they pay now. PPL Corp. told the SEC that its profits will rise about $850 million in 2010 after the rate cap expires.
Here is what Commissioner Christy had to say at the July 17 PUC meeting about the wholesale power market:
"The [PUC] is pushing Pennsylvania's economy into a competitive wholesale market that exists in name only," he said. "The reality is that the wholesale market consists of a series of artificial PJM [regional power pool] pricing mechanisms that produce the highest possible prices for power...The Commission needs to change direction and take steps to insulate Pennsylvania from this dysfunctional market as best we can."
Want some examples? Try to wrap your brain around the idea of "Locational Marginal Pricing." This sets the price of all wholesale power bid into the market at the price of the HIGHEST, not the lowest price bid. It's a great deal if you own a power plant, as the people who sit on the governing board and committees of PJM in Valley Forge tend to do. If you own a small, inefficient plant, you get a price that lets you survive. If you own a cheap, huge, coal-fired or nuclear plant, you reap a bonanza. It is supposed to encourage the building of more transmission capacity.
Or there's the infamous Reliability Pricing Mechanism, or RPM. That, in effect, requires ratepayers large and small to make payments to owners of power plants to encourage them to upgrade old power plants or build new ones. But there's no requirement they do so, so the money, like the payments auto dealers used to extract for undercoating, can go for who knows what.
Christy obviously knows, as I do, that there are powerful people out there who are heavily invested in the delusion of electric competition and are waiting, slobbering even, to collect their huge profits come 2010. They want you to believe there is nothing that can be done except to deal with the higher prices. Other people truly believe that electric competition will somehow become real and make the high prices go away. Some of them sit on the PUC, which last week (Christy's comments on the market are from his dissent) voted down a proposal supported by state Consumer Advocate Irwin Popowsky to require West Penn Power, which serves State College among other places, to take steps itself to provide customers with the lowest price for power possible after its rate cap ends.
Instead, a plan favored by the power plant owners and middlemen was approved that will require West Penn to outsource its power acquisition to middlemen who will deal mainly with the big power suppliers. The middlemen will add layers of profit and cost that will come out of consumer pockets, and the public will have almost no ability to determine whether they are truly getting the cheapest possible power. That's competitive information, after all, and these are private businesses. Just write your check and shut up.
Sonny does a yeoman job in protecting the public interest in utility issues, but he can't do this one alone. It is regrettable that the most visible champions for extending the electric rate caps, which would at least delay the catastrophe, are Sen. Lisa M. Boscola, D-Lehigh, and Sen. Vincent Fumo, D-Philadelphia. Boscola is committed to the issue but not a particularly effective advocate, and Fumo is weighed down by legal problems and in the last six months of his Senate term. He has done great things for consumers in the past, but his day is over and a new champion in the Legislature is needed.
Any volunteers?