A proposal made by PPL Electric Utilities will help smooth a transition to competitive electricity markets that is scheduled to begin in 2010 for PPL customers.

Under the proposal, which applies to customers who do not choose an alternative electricity supplier, PPL Electric Utilities would buy power needed for 2010 by entering into wholesale-market contracts over the next three years.

The company filed the proposal with the Pennsylvania Public Utility Commission, seeking approval of a process that would be administered by an independent third party, with PUC oversight. Prices for the energy would simply be passed through to customers; PPL Electric Utilities would make no profit on these sales.

"Under this proposal, we'll spread out our power purchases and make them well in advance -- a process that would significantly lessen the likelihood that customers would be overly exposed to price spikes in the wholesale markets," said John Sipics, president of PPL Electric Utilities.

Rate limits on the electricity generation portion of customer bills, which have been in place since 1999, expire at the end of 2009. This means that starting in 2010, customer bills will begin to reflect the cost of power purchased by PPL on the open market.

The precise impact on customer rates in 2010 is impossible to predict at this time, Sipics said, because no one knows exactly what market prices will be in the future. He said increases in wholesale electricity prices in recent years have been driven primarily by increases in the price of the fossil fuels burned to make electricity. Based on current prices for future power, PPL believes customer bills could increase on the order of 20% to 30%.

"The prices PPL Electric Utilities customers pay for generation supply have increased less than 9% since 1986," Sipics said. "In fact, inflation has far outpaced the increase in generation rates over the past two decades. If generation rates had matched inflation over the past 20 years, customers would be paying over 60% more than they are today for generation supply.

"The rate limits on generation have provided a significant benefit to customers by keeping electricity rates well below market prices for the past several years," Sipics said. "And those low prices will continue for another three years."

PPL also proposes to expand consumer education, increase funding for low-income customer assistance and expand programs that help customers manage their electricity usage and costs. The proposal was filed with the PUC and requires the commission's approval.

"An important part of PPL's proposal is to provide customers with education and information that will enable them to better manage their usage and costs," Sipics said.