Report: States eye caps on electric rates
End of rate regulation in some states, fear of more expensive natural gas serve as catalysts for possible increases, newspaper says.
NEW YORK (CNNMoney.com) - Officials in some states are considering caps to control increased electric rates, according to a published report. The Wall Street Journal reports that the move to limit rates charged to customers is prompted by the end of rate regulation in a number of states, and indications that a rise in the price of natural gas used to generate electricity could lead to large hikes in some areas. For example the newspaper reports that Delaware customers of Pepco Holdings (Research)' Delmarva Power unit face a 59 to 117 percent rate increase in May, while customers of Northeast Utilities' (Research) Connecticut Light & Power unit are expected to see rates rise 22 percent. In Texas, rates have risen more than 80 percent, according to the newspaper, for customers of the state's biggest utility, TXU (Research). The newspaper reports that Maryland lawmakers are weighing a 5 percent annual limit on rate increases amid evidence that prices at Baltimore Gas & Electric, a unit of Constellation Energy Group (Research), will rise 40 to 80 percent in July when a six-year rate freeze ends. "High prices almost guarantee a political reaction," says Kenneth Rose, senior fellow at the Institute of Public Utilities at Michigan State University. But the newspaper says that rate limits and caps could cause problems. Paul Allen, a spokesman for Constellation, told the newspaper that limits being considered wouldn't give BG&E enough money to buy electricity for its customers. The newspaper reports that could lead to a situation similar to that faced by Pacific Gas & Electric Co. in 2001, when runaway prices in California's wholesale electricity market pushed the San Francisco company into bankruptcy court because it wasn't permitted to raise retail rates enough to cover its higher power costs. Eventually, those higher costs were imposed on consumers. ________________ For a look at the attractiveness of utility stocks, click here. |
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