Allegheny Power won preliminary approval this week from the state
Public Utility Commission for its plan to purchase electricity at lower
rates following the expiration of caps on power rates in 2011.
The Pennsylvania Public Utility Commission (PUC) substantially
concurred with the judge's recommended decision that Allegheny purchase
power for its customers through a combination of 12, 17 and 29-month
contracts, as well as through spot market purchases.
The procurement plan will provide a diverse portfolio of power supply
contracts to reduce rate volatility for customers following the
expiration of rate caps on December 31, 2010. The poll results also endorse Allegheny's plans to mitigate rate
increases, which will offer customers protection from rate spikes after
rate caps expire. The plan provides an option to defer any increase
greater than 25% for as long as three years. The binding poll results
are subject to a final order from the commission. 
Energy prices have been trending upward the last few years. Coal --
Allegheny Power's primary fuel source for generating power -- is
selling on the spot market at about $138 a ton, more than double the
price of $55.25 a ton in December.
The Public Utility Commission this week conducted a public forum on how
the utility should acquire power, using findings from Allegheny Power's
October petition for approval of its customer service plan, plus an
administrative law judge's recommendations on the plan rendered in May.
Default electricity service is provided by Allegheny Power to
its customers who don't select an alternative power provider. The
utility is barred by state law from buying power from sister generating
company Allegheny Energy Supply LLC without going through a competitive
bidding process. Both companies are units of Allegheny Energy.
The new plan includes an option that would allow customers to defer
portions of a rate increase if it is greater than 25 percent for as
long as three years.
In 2005, Allegheny Power and the Public Utility Commission
agreed to phase in a series of rate increases over five years in
anticipation of the move to unregulated electricity prices after 2010.
The increases were designed to help ease the transition to market-based
power rates. That plan was related to the state's 1996 deregulation of
the electricity industry.
Source: Rick Stouffer @ http://www.pittsburghlive.com, http://www.energy-business-review.com