City energy idea has backers, doubters

    Philadelphia area residents and businesses can expect to see a spike in their electricity bills next year after state rate caps expire.

    A new proposal in City Council aims to cushion the blow for some.

    Philadelphia area residents and businesses can expect to see a spike in their electricity bills next year after state rate caps expire.

    A new proposal in City Council aims to cushion the blow for some.

    At year’s end, the rate caps that have been in place since Pennsylvania deregulated electricity in 1997 will expire. City Councilman Darrell Clarke wants to create a nonprofit, city-run energy authority that could buy electricity more cheaply on the wholesale market.

    Clarke:  “After these caps come off we’ve seen between a 25 to 50 percent increase in energy costs associated with that, so we want to make sure we’re prepared to have flexibility to purchase our energy.”

    Initially, this city authority could only pass on the savings to city departments and some businesses. But Clarke hopes residents eventually would be able to benefit, too.

    Peco Energy is Philadelphia’s default supplier of electricity. Under deregulation, though, residents can buy power from other suppliers, which then use Peco’s lines to deliver it. Peco buys the bulk of its energy from its parent company, Exelon.

    Ritchie Hudson, Pennsylvania chairman for the Retail Energy Supply Association, said Clarke’s idea might be complicated to pull off, and could require the city to raise millions in capital. Hudson also suggested the impending rate hikes may not be as high as feared.

    Hudson: “Peco has already bought a significant amount of electricity it needs to serve customers in 2011, and they’ve done so at prices that result in rates more or less what they are today. So the doom and gloom scenarios are a bit overblown.”

    Hudson suggested Philadelphia officials look to Pittsburgh for a better idea on how to curb energy costs. That city formed a buying consortium with area non-profits to pool their energy usage, and bid it out to the cheapest supplier.

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