By JOE LaROCCA
jlar5553@verizon.net
Several weeks ago, First Energy, the parent company for Penelec which provides many western Pennsylvania businesses and homes with electricity, announced a rate increase of about 25 percent. The story reporting the rate hike was written by John GuerrIero, a long time Times-News reporter.
Quotes attributed by Guererro in the article to a Penelec spokesperson tended to minimize the rate increase, as did Guerriero's reporting. In that context, it didn't seem extravagant. But coming on top of a similar rate hike about a year ago places it in its true perspective, something Guerriero failed to do.
I pointed out his glaring omission in an e-mail to the reporter, but he predictably ignored it, despite the fact that it's big news, and will wreak economic disaster on many low income consumers, small business owners, and drive big businesses, like GE, out of the state.
To attempt to compensate for Guerriero's failure to tell the whole story, I wrote what follows for a column and submitted it as a "guest contributor" to the Times-News through the "public editor," Liz Allen, for publication. Allen was initially enthused about the column and told me she'd scheduled it for "potential publication." But that was more than a month ago, and it has yet to see daylight.
I assume that, with due deference to former congressman/governor/homeland security secretary Ridge it succumbed to a viral strain of "sacred cowitis".
While these cumulative rate hikes have fallen like bricks on Pennsylvania users just within the past couple years, they had their genesis during Tom Ridge’s first term as governor back in 1995. It’s one of Ridge’s hidden legacies, a ticking time-bomb just emerging from the shadows of his two-term gubernatorial stint in the 1990s.
A product of the law of unintended consequences, it’s the reversal of the regulation of electrical rates throughout the commonwealth which Ridge sponsored and championed as governor in the mid-1990s.
The return to unregulated electricity rates over the past couple years completed the triple whammy of energy consumer cost explosions, exacerbating the adverse economic
impact which has followed the dramatic increases in gasoline and heating fuels.
Depending upon location within the state, electric rates soared by anywhere from 12 percent to 72 percent during the past two years, with a statewide average of more than 40 percent. Here in Northwestern Pa, they’ve risen by some 50 percent.
It was just about two years ago when the rate caps imposed by the Electricity
Generation Customer Choice and Competition Act - signed into law by Ridge in 1996 after a robust campaign promoting it - expired.
That’s about the time the Pennsylvania Public Utility Commission (PUC) released its study on consumer costs of electricity. The study found expiration of the rate caps would give rise to the cost of electricity in Pennsylvania virtually overnight by an average of 43 percent, imposing a calamitous burden on home, commercial and industry users.
The spike in electric prices is highest in the western part of the state, where they have risen or are rising by as much as 67 percent in Allegheny County, and 50 percent in northwestern Pa., according to the PUC.
Some experts predicted in 2011 that the deregulation scenario, over time, would precipitate an
exodus of industry and commerce from Pennsylvania, already seen with the exit a couple years ago of Steris Corp, and most recently GE’s announcement that it would relocate more than 1,000 jobs from its Erie plant to a new facility in Fort Worth, Texas. While other rationales have been given, rising electrical costs have doubtless played an unspoken role.
They were also expected it to cause hundreds of small businesses throughout the
commonwealth to fail, result in more unemployment, and further impoverish low
income residents. These were effects Ridge‘s 1996 dereguation law was supposed
to forestall, not precipitate.
This came about because the law also enables
electricity producers to charge
rates based upon their costs of production and delivery. Prior to deregulation they could not recover those costs through proportional rate increases because of the ceiling placed on rates by the 1996 act, signed by Ridge in the wake of a high-visibility promotional campaign.
rates based upon their costs of production and delivery. Prior to deregulation they could not recover those costs through proportional rate increases because of the ceiling placed on rates by the 1996 act, signed by Ridge in the wake of a high-visibility promotional campaign.
But when the caps came off at staggered intervals throughout the state starting in 2010/11, electricity producers were able to charge rates which reflect their costs of acquiring the fuels needed to generate electricity – primarily oil, natural gas and coal. Those costs have risen exponentially since the electric rate caps were first applied in 1997.
Normally, the powerful electricity-producing lobby would have been able to thwart passage of legislation in 1996 regulating and capping electrical rates. But what gave regulation its impetus in the mid-90s was a disarming Faustian bargain between the popular Ridge administration and the general assembly on one hand, and the electric industry on the other, the unintended consequences of which only recently began to appear.
This cozy arrangement provided that in exchange for acquiescing to rate caps, the
industry would be allowed by the state through the PUC to bill and recover from consumers the costs of constructing new electrical generating plants, a practice previously disallowed, according to the PUC..
Ridge’s rationale centered on the theory that lower electrical rates than those in other states would attract new industry to Pennsylvania, produce tens of thousand of new jobs, and give rank and file Pennsylvania users more affordable electricity.
In the first years following deregulation, Pennsylvania surpassed other states in electrical rate-lowering, ranking first in the nation. In a February 7, 2001 press release Ridge said: “Once again we were named the No. 1 state for electric deregulation. Why? We have plenty of juice…we’re plugged in. Customers have greater choices. And consumers and businesses have saved $3 billion.
“So if any companies in California are listening,” Ridge exulted, “come on
over to Pennsylvania. We’ll leave the lights on for you.” Ridge said at the time deregulation “will create more than 36,000 new jobs in Pennsylvania by 2004.” That never happened.
Ridge’s theory was based on the optimistic premise that the capped rates would bring new electric-producing competitors into the state and reduce rates overall through wider competition. The flaw in the theory was that it self-destructed.
Newcomers couldn’t compete in Pennsylvania with the big existing producers. Even with the rate caps, existing producers were able to generate healthy profits since regulation went into effect 16 years ago because of the absence of new competition. Wth the unshackling of the rate caps over the past couple years, they have made a killing of unprecedented proportions at the expense of consumers.
How is retribution exacted from a former governor whose failed vision nearly 20 years after the fact results in punitive consequences on an unprecedented scale for his onetime constituents? By elevating him, apparently, to one of the nation’s leading cabinet level positions, widespread celebrity, and other lucrative career moves.
