Duquesne Light bills to drop by 16 percent

Electric bills for residential customers of Duquesne Light Co. will drop at least 16 percent beginning next week, but the savings may be temporary.

"If you take the average Duquesne Light customer, they will see $175 a year in savings," Duquesne Light spokesman John Laudenslager said. "You multiply that by the 500,000 customers, then you see $90 million of spendable income that customers in this area will retain."

But the reduced rates for western Pennsylvania customers could end when rate caps put in place by the Public Utility Commission expire in two years.

The utility will slash 3.3 cents per kilowatt hour — $18.22 for an average customer who uses 550 kwh a month — on bills beginning next Wednesday. That's three years ahead of schedule.

Customers will get the break because Duquesne Light will stop billing for transition costs, also known as stranded costs — charges that help the utility offset the cost of converting to a deregulated electricity market. Duquesne Light used part of the proceeds from the $1.7 billion sale of its generating plants to Baltimore-based Orion Power Holdings Inc. in 1999 to pay off transition costs early.

But the end of transition costs will usher in other expensive changes on the same electricity bills, changes that whittled earlier projections of 25 percent savings down to 16 percent.

Duquesne Light is increasing its generation charges, the actual price of producing electricity, under a previous agreement with the PUC intended to increase competition. The hike makes room for other utility companies to enter the market and undercut the price of the region's largest electricity provider.

Duquesne Light's generation charge will rise from 4.714 cents to 5.845 cents per kwh. One kilowatt hour is the amount of energy it takes to run 10 100-watt light bulbs for an hour. The increase will also affect bills from competing electricity suppliers, which are allowed to be 3 percent lower than Duquesne Light's price. Customers who buy electricity from Dominion Peoples Plus have already been informed that their cost will rise to 5.67 cents per kwh.

Proponents say Duquesne Light's rates will be lower than they have been in decades.

"It is a very big deal," said John Hanger, executive director of Citizens for Pennsylvania's Future, a Pittsburgh-based nonprofit energy and environmental advocacy organization. "I will bet you that when those stranded-cost charges come off the bill, electricity costs will be back to the lowest levels since the 1980s. In inflation-adjusted dollars, Duquesne's bill may be down nearly 40 percent," he said.

Transmission and distribution charges for delivery over Duquesne Light's power lines will remain unchanged, for now. Those costs are capped through 2003 under a settlement reached in November 2000 with the PUC.

When the price caps are removed, electricity rates will be determined by the energy market. That next phase of deregulation greatly concerns consumer advocates, who fear the uncertainty of market fluctuations.

Next week's billing reduction is not what Duquesne Light originally envisioned.

That's because of Duquesne Light's proposed membership in a regional transmission organization, called PJM West, which is the western component of PJM Interconnection LLC, based in Norristown, near Philadelphia.

Membership in PJM West will eventually allow Duquesne Light and other utilities to take advantage of lower, pooled transmission costs. Lower transmission costs should make it easier for competing providers to enter the market, bringing more choice for consumers.

Regional transmission groups like PJM coordinate a grid of pooled generating capacity from utility companies in Pennsylvania, New Jersey and Maryland.

The higher price that customers will see on their bills initially reflects higher costs required for Duquesne Light's membership in PJM West, according to Hanger. But the membership should eventually result in lower costs being passed on to consumers and is expected to stimulate competition that should also send prices down, observers say.

Duquesne Light previously announced an agreement with Akron, Ohio-based FirstEnergy Corp., the parent of Pennsylvania Power and the owner of the Beaver Valley nuclear generating plant in Shippingport, to provide more than 60 percent of the capacity Duquesne Light is required to have on reserve with PJM West.

Duquesne Light has declined to reveal the cost of that agreement. The cost is the main reason for reduced savings, observers say.

David Hughes, executive director of Citizen Power, a Pittsburgh-based consumer watchdog group, said the contract could cost between $40 million and $70 million. The actual price probably won't be known until Duquesne Light files a formal request with the PUC to join PJM West. Hughes has criticized the utility for not disclosing the amount.