HARRISBURG — Consumers bracing for sticker shock when electric-rate caps expire in a few years could get some relief as part of a state budget deal being negotiated by the governor and Legislature. Greg Fajt, Gov. Ed Rendell’s chief of staff and a lead budget negotiator, said Friday that lawmakers have been pushing for some way to phase in the higher rates so they do not hit at once. Rate caps are scheduled to expire in 2010 and 2011 for Pennsylvania’s electric customers –leading to large increases that will affect 4.8 million residential, commercial and industrial customers. “We understand why now is the time to do that,” Fajt said, speaking to Capitol reporters. “I think everybody realizes that they’re going to get one bite at the energy apple and if there’s an issue with rate caps, now’s the time to do the rate cap mitigation piece.” The temporary rate caps were established as part of Pennsylvania’s 1996 electric deregulation law that was promoted as a way to lower rates due to increased competition. When the caps expire, utilities will be able to bill customers at market prices. The estimated 8- to 63-percent increases that loom on the horizon have drawn the nervous attention of state lawmakers. Fajt said the administration is leaving negotiations over the details to the General Assembly. “People (are) looking at rate hikes that could be catastrophic for many working families,” said Bob Caton, a spokesman for House Majority Whip Keith McCall, D-Carbon. “Considering that extending the caps may not be an option, the best option to do is try to soften the blow as early as possible.” He said different approaches are being considered, and it’s uncertain if the phase-in would begin ahead of 2010. A Senate Republican spokesman, Erik Arneson, said the idea is to phase them in over as long as five years. “We view electric rate mitigation as the most pressing energy issue, so we are hopeful some agreement can be reached this month,” he said. Doug Colafella, a spokesman for Greensburg-based Allegheny Energy Inc., said the utility was working with the Legislature and other industry figures on potential legislation. The company is generally supportive of a phase-in and said there are “a number of proposals in play,” he said. “I think the most important thing is that you protect consumers and businesses in Pennsylvania, you protect them from any exorbitant rate increases,” he said. “But at the same time, we need to protect the financial integrity of the state’s electric utilities.” Peco Energy Co. spokeswoman Cathy Engel said the Philadelphia-based utility would support a phase-in that begins before the caps expire, or one that starts at the expiration date. “We do believe, though, that the early phase-in will be a very important tool for customers to help them manage the impact,” she said. Fajt said lawmakers put the issue on the table about a month or two ago. The administration’s own energy proposal includes an $800 million borrowing plan to finance alternative and cleaner energy projects. Rendell also wants to require utilities to install a “smart meter” for each Pennsylvania electric customer in an effort to cut energy bills. Fajt said he remains optimistic that a budget deal can be struck before the state’s fiscal year ends June 30. After that date, Rendell could furlough some 25,000 state workers and order a partial shutdown of state government, as occurred for one day last summer.

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