Rate Caps Are Coming Off — Are You Ready?

Charlene M. Shupp
Espenshade
Special Sections Editor

LANCASTER, Pa. — Energy was the theme of the day as poultry producers and industry representatives gathered at the Lancaster Farm and Home Center on March 5.

For the last decade, the state’s utility companies have had their rates capped.

Starting this year and through 2010, the majority of these utilities will have the caps removed. Projections are that most consumers will see an estimated 50-percent increase, according to John Nikoloff of the Harrisburg-based Energy Resources Group.

Nikoloff said the complex issue of energy regulation will be a difficult one and farmers need to pay attention as the state government tackles it. In 2008, the General Assembly did not deal with the issue because of the election. Now with more than 78 percent of the state preparing to have their rate caps come off in the next two years, the legislature is taking a hard look and trying to figure out what to do next.

Compounding the issue is that several companies have already had their rate caps taken off, so an extension of the current policy would not be fair to those companies.

In areas where the caps have come off, Nikoloff said the story has been varied. After the original spike, the rates have settled back to pre-cap rates in some areas, while others have remained high.

While answers are not definite, Nikoloff said that there has been some action, including the passage of Act 129 of 2008, to work with electric generation companies to ensure a “prudent mix” of energy sources and permit electric customers to switch generation supplier according to their basis. Also, electric companies need to develop energy conservation and efficiency programs to reduce their peak demands by 2013.

According to Nikoloff, the ability to shop for electricity could open up some opportunities for customers.

Also speaking on the topic was Frank Richards of Landisville-based Richards Energy Group. He said that farmers in the PPL distribution area have 10 months until “future shock becomes current shock” as PPL becomes the first larger electric utility in southeastern Pennsylvania to take rate caps off.

Richards challenged farmers to prepare for the rate cap removal deadline.

While generation and transmission rate caps will go away, distribution charges will remain and continue to be regulated. The portion that a farmer can shop for is the transmission and generation charge.

Farmers will be able to compare companies by using “PTC” (price than compare), a comparison of transmission and generation charges.

Richards’ company shops for rates for his clients in addition to conducting energy audits on commercial clients.

When shopping for electricity, Richards said that farms need to look for a commercial rate. There is not a residential program yet. While farmers can shop independently for their electricity, if they are not familiar with the process, they need to be careful and make sure they clearly understand what they are doing.

He gave an example of a retirement community that actually paid more for their electricity after shopping for a better deal.

“If you don’t know whether you are going to save money, be very careful when shopping,” he said.

Another option for farmers is to join a consortium. Richards said that electric generators like to work with programs like his because they can get multiple accounts in one purchase. He said that he works with about 250 companies.
“Our mission is to make sure our clients do not overpay,” he said.

Richards has worked with several clients in western Pennsylvania as well as Maryland and Delaware. He said many of the price spikes felt in those areas were compounded by the rising fuel prices in 2007 and 2008.

He agreed with Nikoloff that energy audits could help a farmer save money by implementing energy efficient practices, such as capacitors for motors and more energy efficient lighting. Richards also shared a couple of other ideas on improving the use of natural lighting. He said that installation of energy efficient lighting has halved the lighting bill for some of his clients.

A unique opportunity being piloted by the PJM (Pennsylvania, Jersey and Maryland) grid is looking for businesses willing to go off the grid for six hours during emergency demands on the grid, by self generation. Participants are paid for their willingness, even if they are not called.

Opportunities are also available for Pennsylvania businesses through the federal stimulus package. However, specifics on how it will be implemented will depend on action taken by the Pennsylvania General Assembly and governor’s office. Nikoloff said there is a fight between the General Assembly and governor’s office on how the funds should be distributed.

The stimulus package has components for weatherization, energy efficiency and energy development through tax credits, grants and rebate programs.

“The bulk of the stimulus package goes to energy efficiency and conservation, not energy generation,” Nikoloff said. The federal Farm Bill has more of the energy generation components.