Doug Biden, president of the Electric Power Generation Association, today offered numerous reasons why extending price caps would ultimately lead to higher prices and less reliable service for Pennsylvania consumers. Biden made his comments in response to testimony today before the House Environmental Resources and Energy Committee on Special Session House Bill 54, which would extend electric generation rate caps to January 2013.

Biden emphasized that extending caps on retail prices would require electric utilities to sell electricity at a loss. "This policy would increase the risk of investing in generating plants and other forms of electricity infrastructure," Biden said. "The end result would be more expensive, less reliable supplies of electricity for consumers."

Biden noted that power suppliers would likely add premiums to their prices to cover the risk that utilities would not be able to pay for the electricity. The uncertainty created by such a rate cap extension would also discourage generators from building needed new generation in Pennsylvania.

Biden said, "Wholesale electricity prices have been rising due primarily to higher fuel costs, not because of electricity competition." According to the Pennsylvania Public Utility Commission, since 1997, prices have increased over 180% for fuel oil, approximately 140% for natural gas and unleaded gasoline, and over 50% for coal. Biden said that energy prices have also increased due to rapid growth in demand for fuels from developing countries and increasingly stringent environmental requirements.

Biden noted that while price caps have been in effect since January 1997 for most electricity customers in Pennsylvania, ultimately consumers will have to pay the market price for electricity. Biden said, "The longer electricity prices are capped, the more difficult it will be to help consumers make the inevitable adjustment to market-based prices. Delaying the inevitable transition to market prices will not move Pennsylvania forward but instead will make the transition even more difficult."