STEEL CITY SHATTERED: PA UTILITY CUSTOMERS FEEL IMPACT OF RATE INCREASES

(Image of Hatfield’s Ferry Power Station) 

Pennsylvania Electric bills have steadily climbed. Customers have seen significant increases in their price to compare which is the average electric supply rate. There have been a handful of factors that have caused electricity rates to surge. In this article we will take a quick look at the contributing factors that have led to increases of as much as 30% in some areas, as well as an energy outlook on what consumers in this region can expect going forward.

The groundwork was laid a few years ago. The first domino to fall in Pennsylvania was due to EPA regulations (Clean Power Plan) forcing generation plants to close. Pennsylvania was one of the states hit the hardest by these regulations FirstEnergy announced in 2013, it would close the Hatfield’s Ferry and Mitchell power plants near Pittsburgh. The plants were both already losing money to cheaper fuel sources, such as natural gas, so First Energy decided to close them down, rather than modernize them to meet new clean air standards.

As you can see in the illustration above, Pennsylvania has been heavily dependent on coal as a fuel source for electric generation, utilizing it almost as much as 40% in 2013. With the First Energy power plants no longer part of the generation equation, Pennsylvania is scrambling to adjust to the regulatory mandates.

As more power plants have been developed to burn natural gas, coal’s share of total U.S. electricity generation has declined from a whopping 50% in 2005 to 39% in 2014, according to government data. At the same time, the natural gas fired electricity generation grew from 19% to 27%. This past May, natural gas installed capacity surpassed coal for the first time in history in PJM’s territory. The PJM is the organization that operates the electric grid for thirteen states, including Pennsylvania

(For information on how Pennsylvania consumers can combat these changes in their electricity service: CLICK HERE)

The next impactful issue was the PJM capacity auction held in May 2012. The PJM holds an annual auction to secure electricity capacity to meet the needs of a 13-state region. With capacity costs higher than normal, electricity prices followed suit. According to PJM, prices increased due to the unprecedented retirement of the previously mentioned coal-fired generation plants.

All of these factors are cause for current increases for consumer’s electricity bills, as well as probable speculation that rates will continue to rise in the future. Customers of some of the larger utilities in PA such as PP&L and PECO, have seen supply rates average over 9 cents over the past few years.

What this all means is that Pennsylvania consumers will need to plan their energy budgets accordingly. The recent rate hikes do not seem to be an anomaly. They appear to be the opening act for a transition period that will cost them substantially.

Matt Helland
SVP-NAEA

Sources:
http://powersource.post-gazette.com/
https://stateimpact.npr.org/pennsylvania/
http://www.eia.gov/