PPL to buy power for Pennsylvania for 2011-2013

NEW YORK, June 18 (Reuters) - Pennsylvania utilities regulators approved of PPL Corp' plan to start buying the power its customers will use in 2011 and beyond, the company said in a release Thursday.

PPL said it will buy electricity for 2011, 2012 and the first five months of 2013 soon because prices now are low due in part to the lower cost of the fuel, primarily natural gas, burned to generate the power.

The power will supply customers who do not buy electricity from other suppliers.

Pennsylvania allows customers to choose their generation provider. PPL's distribution company does not generate power. PPL must buy power for customers who do not buy it from other suppliers. PPL passes that cost on to its customer without profit.

Generation currently accounts for about half of a typical customer's electric bill.

PPL said it will issue a request for bids for electricity needed for the first five months of 2011 soon. The company then plans to make purchases over time to help minimize the risk of price spikes.

The company plans to buy the power through a mix of long-term, short-term and spot-market purchases. Beginning in 2011, generation prices for residential and small-business customer rates will reflect a blend of prices from the different purchases. PPL will adjust prices quarterly as they are now for the state's natural gas utilities.

For years, competitive suppliers - who generally buy power in the market at current prices - could not compete with the prices utilities like PPL offered because the utilities prices were capped by the state at 1990s levels as part of the deregulation of the market. Those capped prices were much lower than recent market prices.

That will change beginning in 2010, PPL said.

PPL has been preparing for the 2010 transition from capped rates to market rates for years. The company plans to make its final purchase of power customers will use in 2010 this fall.

Unlike utilities in other states that went through a similar transition in recent years, PPL has been buying power for years to come up with a blended rate for 2010 to avoid shocking customers and their elected officials with price spikes.

PPL, of Allentown, Pennsylvania, owns and operates more than 11,000 MW of generating capacity in the United States, markets energy commodities, and transmits and distributes electricity to more than 4 million customers in Pennsylvania and the United Kingdom. (Reporting by Scott DiSavino; Editing by Marguerita Choy)