UNIVERSITY PARK, Pa. -- The imminent deregulation of the electricity industry could have a significant impact on Pennsylvania companies and consumers, and people will need to be ready for the changes deregulation will bring, says an agricultural engineer in Penn State's College of Agricultural Sciences.
In December, Pennsylvania Governor Tom Ridge signed a law to deregulate the generation of electricity in Pennsylvania, making it a competitive industry. Previous deregulations have involved trucking, airline travel, natural gas and long distance telephone service.
"In 1996, Pennsylvania consumers spent $10 billion for electricity," says Dr. Dennis Buffington, professor of agricultural engineering. "If the price of electricity drops to the national average because of deregulation, then Pennsylvania consumers will save $1.5 billion per year. The savings could rise to $2.5 billion per year if rates drop to the anticipated competitive prices when deregulation is fully implemented."
One-third of all residential, commercial, and industrial customers must have freedom of choice in selecting an electricity provider by January 1, 1999. Two-thirds of all customers must have choice by January 1, 2000, and all customers must have it by January 1, 2001.
Deregulation will result in many changes, and utility companies already are establishing pilot programs to gain experience with the deregulated environment.
"The state Public Utilities Commission currently guarantees investor-owned utilities the opportunity to make a profit," Buffington says. "In the competitive environment, these companies will no longer be guaranteed a profit. Rural electric cooperatives have never been guaranteed a profit, since they are operated as non-profit cooperatives."
Electricity pricing will change. "Today, pricing options are limited and relatively easy to understand," Buffington says. "In the deregulated environment, there will be many pricing options and some may be very complex."
Customers also will have more choices. "Today you buy just your electricity from your designated utility company," Buffington notes. "Soon, utility companies will offer many products and services, which may include propane, diesel fuel, energy services, financing, equipment and maintenance."
In addition, many organizations will be vying for your business. "You can expect pesky phone calls just when you are sitting down to enjoy supper," Buffington says. "If that happens, investigate offers that sound too good to be true. They probably are."
Consumers should begin to become better informed in order to respond to the upcoming deregulation. First, become aware of your own electricity needs. "Document how much electricity you use and when you use it, then identify what equipment or operation uses the most electricity," Buffington suggests.
"If you're a farmer, document how much electricity you use, both in kilowatt hours and dollars, to produce 100 pounds of milk, one dozen eggs, one pound of meat, one flat of bedding plants or one bushel of fruit," Buffington says. "After you have carefully documented how and when you use electricity, then you will be able to negotiate effectively to get the best buy for electricity."
More information about deregulation is available from your utility company, trade journals, the Pennsylvania Public Utility Commission, or from Agricultural and Biological Engineering Extension, The Pennsylvania State University, 246 Agricultural Engineering Building, University Park, PA 16802.
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EDITORS: For more information, contact Dennis Buffington at 814-865-2971.
Contacts: Eston Martz Eston_Martz@agcs.cas.psu.edu 814-863-3587 814-865-1068 fax