Small businesses' electricity bills set to rise average of 10 percent

Duquesne Light Co.'s proposed rate changes could lead to an overhaul in the way rates are calculated for small commercial and industrial customers and an average increase of about 10 percent in those customers' monthly power bills.

Last week, the Downtown-based electricity provider filed proposed rate changes with the Pennsylvania Public Utility Commission for 2008 through 2010.

The average small commercial and industrial customer that uses 6,000 kilowatt-hours would see its power bill rise from $535.67 per month in 2007 to $585.39 per month in 2008, said Duquesne Light spokesman Joseph Vallarian.

As part of the state's deregulation process, Duquesne Light, which was the first electricity provider in the state to go through deregulation, serves as the default provider for all customers within its territory, which includes parts of Allegheny and Beaver counties.

Already, the majority of Duquesne Light's large industrial and commercial customers are using other providers -- out of 870, all but 74 use other electricity suppliers, according to John Laudenslager, senior manager of government affairs for Duquesne Light.

"(The new rates) will serve as a bridge to when the whole state will fit under the regulations," Laudenslager said. "(It will mean) a more robust market."

MAJOR CHANGES

The new generation rates, which still need to be approved by the PUC and are likely to face stiff opposition from deregulated competitors, are designed to encourage companies to shop for electricity and move away from the default service.

Duquesne Light expects the PUC to make a decision on the rate change by July 1. Under the proposal, residential rates would rise by about 9 percent, and large industrial and commercial customers would have to pay on an hourly rate rather than a fixed rate. Default service fixed rates for these customers are set to expire June 1.

But the biggest changes likely would be for the smaller commercial and industrial customers, which are defined as those who use less than 300 kilowatts per month. Currently, they are grouped together with residential customers and are billed based on a complex formula including both

demand and consumption.

Under the new proposal, these 52,000 customers, who currently pay between 5 cents and 17 cents per kilowatt-hour, would receive their own classification and see significant changes in how they are charged.

Currently, customers pay both a demand charge -- based on their peak usage over a 15 minute period -- and a consumption charge, determined by cents per kilowatt-hour of usage.

By 2010, customers would instead pay for electricity based off of the consumption rate only.

The demand charge would be cut by one-third each year between now and 2010 starting in 2008.

The consumption charges would change each year based on current market rates. In 2008, the overall average generation rate for small commercial and industrial users would rise 9.3 percent compared to 2007 rates. However, these customers would see anywhere from a slight

decrease in what they are paying to more than a 10 percent increase, Laudenslager said.

That's because customers who use large spurts of electricity at one time, such as car crashers and welders, tend to pay higher demand rates, while those who run eight to 10 hours per day tend to have more even rates.

'very difficult to compare'

The simplified rate structure is designed to help make it easier for smaller companies to comparison shop for electricity. There are currently six suppliers in the Duquesne Light territory that offer service to these customers, Laudenslager said.

William Lloyd, the small business advocate for the Harrisburg-based Pennsylvania Office of Small Business Advocate, said he's in favor of eliminating the demand charge.

"From our perspective, it is very difficult to compare the Duquesne price with a price offered by (competitors)," he said. "Those (demand charges) are vestiges of the days in which the utility companies built and operated the power plants. We favor moving in the direction of flat rates."

Yet, Cliff Shannon, president of SMC Business Councils, a Churchill-based trade organization that represents smaller manufacturers in Western Pennsylvania, is still concerned there is too much technical language in the plan. For example, he is concerned smaller businesses won't be able to depart from the default service more often than once a year since the prices are still fixed.

Martha Duggan, vice president of the Mid-Atlantic region for Baltimore-based Constellation NewEnergy, one of the competitive suppliers, said Constellation is reviewing the plan and will probably file an intervention to try to ensure that the market stays competitive.

"It's a growing market for us," she said. "We are in this market, and we are here to stay."

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