New Study Finds Generators in Deregulated Markets Continue to Profit at Consumer...

New Study Finds Generators in Deregulated Markets Continue to Profit at
Consumer Expense

Largest Power Sellers in PJM Interconnection Earned Three Times
as much as Regulated Utilities

WASHINGTON, June 1 /PRNewswire-USNewswire/ -- Owners of unregulated power
generation in the Mid-Atlantic continue to enjoy high profits in 2008, despite
the economic downturn, according to a study of financial data released today
by the American Public Power Association.

The analysis examined a range of measures of profits and shareholder earnings
for nine of the largest sellers of unregulated generation in the PJM
Interconnection, a Regional Transmission Organization (RTO) operating the
wholesale electric market that provides power to more than 51 million
customers in the Mid-Atlantic. The study, "The Deregulation Penalty: Losses
for Consumers and Gains for Seller," by financial consultant Edward Bodmer,
compares the earnings and shareholder benefits of these companies with those
of regulated, vertically integrated utilities to estimate the cost penalty to
consumers under deregulation.

The greatest profits continue to be earned by those companies that owned
generation largely paid for by ratepayers under cost-of-service regulation.
Just three of these companies report financial data separately for their
generation segments, which show even higher profits when analyzed. In 2007
and 2008, the generating segments of Exelon, Public Service Enterprise Group
(PSEG) and PPL Energy (PPL) realized annual returns on equity of 30 percent,
three times the 10 percent returns for regulated companies.

"These RTO wholesale power markets were created to assure competition and
lower electric rates and have done neither," said Mark Crisson, CEO of APPA.
"Instead they produce power costs that unfairly reward a few generators and
punish consumers."

Prior studies conducted for APPA have documented extensive problems in RTO-run
wholesale power markets and led APPA to the conclusion that these markets are
not producing "just and reasonable" prices, as required under federal law. An
analysis of data from the U.S. Department of Energy, Energy Information
Administration, for instance, revealed that increases in retail electric
prices were significantly greater in states with deregulated electric markets
than in regulated states over the last decade.
(http://www.appanet.org/files/PDFs/RKWFinal2008update.pdf)

The study found that all the profits of these companies increased or held
steady in 2008. Specific findings include:

-- Profits for the generating segments of just three of the companies
were
$10 billion greater than for a sample of regulated utility companies
in
2007 and 2008 combined, and $20 billion higher over the past seven
years.
-- In 2008 alone, the contribution to profits from the sale of
electricity
increased by $4.4 billion for all the companies.

-- Shareholders in the PJM companies earned $47 billion more than if they
had invested in the S&P 500 over the past ten years, and $26 billion
above investments in regulated utility companies over the same time
period.

The full study is available at:
http://www.appanet.org/files/PDFs/BodmerUpdatedFinancialAnalysis52009.pdf

APPA (www.appanet.org) is the national service organization for the nation's
more than 2,000 community- and state-owned electric utilities serving 45
million people. APPA's Electric Market Reform Initiative (EMRI) is addressing
the pervasive and increasingly serious problems in the nation's wholesale
electricity markets, particularly the Federal Energy Regulatory
Commission-approved regional transmission organization (RTO)-run markets. For
more information on EMRI: www.appanet.org/emri.cfm.

SOURCE American Public Power Association

Elise Caplan of American Public Power Association, +1-202-467-2974