Competition provides lower Penn. power prices -PPL

NEW YORK, March 15 (Reuters) - PPL Corp.'s (PPL.N) distribution subsidiary, PPL Electric Utilities, told Pennsylvania legislators Thursday that a competitive electric market provides lower power prices than a regulated market.

"Consumers in Pennsylvania are paying 12 percent less for electricity today than in 1996" after adjusting for inflation, Robert Geneczko, PPL's vice president of customer services, said at an informational meeting of the state House Consumer Affairs Committee.

Pennsylvania, like many other states that deregulated their electric markets, required utilities to reduce energy supply costs and then capped those costs for a number of years at what are now below market rates, due primarily to a recent increase in the cost of the fossil fuels (coal and natural gas) burned to generate power.

Now the legislators are trying to figure out how to ease the rate shock experienced at other utilities in the state and in other states when the caps expire and customers start to pay market rates for power.

PPL's energy supply caps, which have floated up a bit since they were set in 1999, expire in 2010. The company's energy costs, which make up about two-thirds of a customer bill, are well below the wholesale market cost of power.

PPL's generation subsidiary, PPL Energy Supply, supplies power to PPL Electric Utilities' customers under a contract that expires at the end of 2009.

Energy supply costs are different from distribution costs, which make up about a third of a customer bill, and cover the cost of personnel, poles, wires and other equipment needed to deliver electricity.

PPL plans to file soon with the state Public Utility Commission for an increase in distribution rates of less than 7.1 percent for 2008.

In August 2006, PPL asked the PUC to approve of its plan to allow PPL Electric Utilities to buy power over the next three years for those customers who do not choose an alternative electric supplier for 2010.

Power customers in Pennsylvania can buy their power from a competitive supplier. Few have decided to do so, however, since other suppliers cannot compete with the utilities' below-market, capped energy supply rates.

Only 52 of PPL Electric Utilities' 1.4 million customers have switched to alternative suppliers.

A spokesman for PPL said the company expects the PUC to consider its energy supply proposal in April, which, if approved, would allow the company to seek bids for power later this year and again in 2008 and 2009.

PPL, of Allentown, Pennsylvania, owns and operates about 11,500 MW of generating capacity in the United States, markets energy commodities, and transmits and distributes electricity to nearly 5 million customers in Pennsylvania, the United Kingdom and Latin America.