House Committee Questions PUC On Competitive Markets, Pipeline Safety, AEPS

Public Utility Commission Chair Robert Powelson was joined by fellow Commissioners John Coleman, Tyrone Christy, Wayne Gardner and James Cawley before the House Appropriations Committee today to answer questions on their FY 2011-12 budget request.

Unlike other state agencies, the PUC is funded by assessments on the industries regulated by the Commission, not by general tax monies. The budget request is for $63 million of which $4.1 million is federal funding.

Testimony: Copy Of PUC Testimony

Competitive Energy Markets: Chairman Powelson noted Pennsylvania is nationally recognized for its transition to competitive electric and natural gas markets. As of January 1, all customers have the option to seek competitive energy suppliers in the state.

On the electric side, 960,000 residential customers have chosen competitive suppliers and there has been an 300 percent increase in the number of electric suppliers competing to provide power to customers. In the case of PPL, Chairman Powelson said 40 percent of their residential customers and a higher percentage of business customers have switched.

Chairman Powelson credited lower natural gas prices in part for lower electric costs, but noted "education, education, education" is needed to get the other 70 to 80 percent of customers to switch.

Commissioner Cawley said the PUC also had other options for dealing with the issue, such as supporting legislation to require electric customers to choose like Texas did or auctioning off default electric service and giving customers a rebate on the expected savings. He did note at least one utility covering 70 percent of the state wants to retain the ability to offer default electric service.

Pipeline Infrastructure/Safety: Chairman Powelson said the recent explosions in Allentown and Philadelphia have highlighted the need to replace aging infrastructure for natural gas and again recommended the enactment of a DSIC (distribution system improvement charge) to fund replacement of pipelines like exists for water systems.

Powelson noted 52 percent of the pipes used by the Philadelphia Gas Works are cast iron or bare steel pipes and need to be replaced.

Since the water DSIC was enacted, annual water line replacement increased from 25 to 95 miles a year without rate shock for customers. The PUC recommends enacting a DSIC for natural gas infrastructure such as was include in House Bill 744 (Solobay-D-Washington) of last session.

Without a DSIC program, it would take 120 to 150 years to replace just the natural gas infrastructure and would impose additional costs on customers by requiring natural gas companies to go for rate increases. This is about a $15 billion infrastructure problem.

Chairman Powelson also said the PUC's authority over natural gas distribution and gathering lines should be updated by the passage of House Bill 344 (Baker-R-Tioga) and Senate Bill 325 (Baker-R-Luzerne).

Presently, Chairman Powelson said, the PUC has 8 pipeline inspectors trying to cover over 46,000 miles of pipeline without including hundreds of miles of new pipeline resulting from the Marcellus Shale natural gas industry.

Chairman Powelson said the federal pipeline safety agency is telling the PUC cannot put enough "boots on the ground" to regulate safety and the state needs to step up its efforts. Powelson said they would propose getting the resources to hire additional inspectors by assessing a fee on pipeline companies on a fee for mile basis.

Telephone Access Charges: Several Commissioners noted Chapter 30 of the PUC rules governing telephone access charges and local rates should be updated due to the changing characteristics of the telephone industry with respect to land lines and cell phone service.

Commissioner Cawley said he would rather not have a provision in law which requires an increase in local rates with every reduction of local access charges.

PUC Restructuring: Commissioner Coleman said he expects a final recommendation on restructuring the PUC operations by the end of March.

Energy Marketers: Rep. Ron Waters (D-Philadelphia) said he continues to get complaints about the tactics of door-to-door marketers soliciting his constituents to change energy suppliers. Chairman Powelson said the PUC wants to know the details about the problem he's having.

In addition to information posted on its website, the PUC is doing public education events, including another event in Rep. Waters's district to let the public know what the rules are and where customers can get help.

Commission Gardner said he has zero tolerance for energy marketers violating a recently updated code of conduct and he would like to know the details of any complaints against marketers. Chairman Powelson said the PUC has received 79 complaints to investigate.

Alternative Energy Standards: Chairman Powelson said he would not advocate a change in the AEPS standards and allow it to continue to be implemented in Pennsylvania's competitive electric market. He said projects should compete in the marketplace to help lower costs for consumers.

Powelson noted without an AEPS, the alternative energy industry would not have developed as quickly in Pennsylvania.

Commission Cawley said Pennsylvania should have a reciprocal agreement legislation to require other states to open their alternative energy markets to state utilities. Pennsylvania, for example, now allows state utilities to buy AEPS credits in PJM and Illinois, however, Illinois has significant barriers to their utilities buying alternative energy credits in Pennsylvania.

Commissioner Christy also said he is concerned about state utilities being able to buy alternative energy credits as far away as North Carolina where solar projects there use Chinese-made equipment and do not add any jobs to Pennsylvania.

Rep. Jeff Pyle (R-Armstrong) asked if AEPS standards need to be adjusted to keep the cost of electricity reasonable for electricity customers, given the availability of new Marcellus Shale natural gas resources.

Commissioner Christy said the cost of new gas generation is about 5 cents and coal 3 to 4 cents per kilowatt hour. Pennsylvania's abundant coal resources allows the state to export about 30 percent of the electricity we generate. He said we need to be sensitive to these costs going forward.

Electric Transmission Constrained Areas: Chairman Powelson said there are electric transmission bottlenecks in Eastern Pennsylvania and in getting wind energy "over the Alleghenies" to central and eastern portions of the state. He said the good news is there has been an investment to build 8,500 megawatts in generation in the state providing additional capacity.

Commission Christy said the economic slump has meant electric generators in Western Pennsylvania have been able to supply electricity to Ohio and other western areas.