Borough Electric Customers to see Rate Increase

As the electric provider for all Borough residents, the Borough of Perkasie would like to notify customers about the upcoming rate increase that will have a significant impact on their monthly electric bill.  Within the last several months, there has been a lot of media attention concerning the rising cost of energy and rate caps.  And while the Borough is not directly impacted by the expiration of rate caps, the Borough does feel that it is necessary to explain this to customers and shed some light on how Borough electric rates compare to the rates being paid by our neighbors. 

Expiration of Electric Rate Caps

Under Pennsylvania legislation taking effect on January 1 of 1997, the generation portion of electrical service was made open to competition.   However, the transmission and distribution component remained regulated.   As part of the legislation, the Pennsylvania Public Utility Commission (PUC) capped electricity rates so that the rates would not exceed prices that existed on January 1, 1997. This rate cap was of four to nine years duration.  The effective and termination dates of the rate cap varied by utility.    

The legislation applied only to jurisdictional utilities of the PUC and not Pennsylvania Boroughs that operate their own electric service, such as Perkasie.   We are not subject to the jurisdiction of the PUC.   Since rate caps are expiring, those electric utility customers will experience significant increases in their electric bills.  But the same market forces that will lift the rates for PUC controlled utilities are already in effect in Perkasie.  Experts in the field tell us this is due primarily to nationwide increased demand and no new generating capacity becoming available.  In short, supply and demand is driving up costs. Please click here for more information on the expiration of rate caps.

Rate Increase

Historically, Perkasie Borough residents have enjoyed electric rates lower than other municipal-owned utilities due to fortunate market timing back in 2003.  Five years ago, the Borough negotiated a contract to purchase wholesale power from DTE Energy of Detroit at very favorable rates.  That contract for the wholesale purchase of electricity is set to expire on December 31, 2008.  Earlier this year the Borough sought competitive bids for a new contract for purchasing wholesale electric for a new five year contract.   

The results of the competitive bid have been tabulated, and the bid for wholesale electric was awarded to AMP-Ohio, the lowest bidder, in August.  The wholesale rate that the Borough is charged will go up over 81% from 2003 rates. Fortunately, the Borough will not pass all of this increase on to its customers.  The amount of the rate increase is 41.64% to be effective on the next billing cycle beginning on November 16, 2008 and 17.40% to be effective with the billing cycle in November of 2009. Please click here to read the ordinance.  The Borough is encouraging residents to prepare for the increase now by cutting energy usage and budgeting accordingly.   

Over the last five years, the Borough has passed on lower rates than most of our neighbors, including municipal-owned utilities and public utility companies.  With the Borough’s new wholesale rates increasing drastically, it is anticipated that the Borough’s rates will be temporarily higher than our neighbors.  With the final rate caps set to expire on public utility companies in 2010, the rates paid by their customers are expected to exceed Perkasie Borough rates at that time.   

The rate caps set during Pennsylvania’s electric restructuring helped create an artificial sense of low energy prices over the last decade.  In reality, the prices of coal and natural gas, which are used to generate electricity, have increased roughly 55 percent and 250 percent, respectively, between 2000 and 2007.  Therefore, although the expected rate increase might seem excessive to the casual observer, in light of the broader energy commodity market, the increased price more accurately reflects the true market price of electricity.   

Electric Fund Revenue Supports the Borough

The Borough relies on its electric fund to supplement its general operating fund and its capital reserve fund, which helps pay for projects like road improvements, public works and police vehicles, and infrastructure improvements.  Typically around 20% of our operating budget (general fund) and our entire capital fund is funded by electric sales. 

Saving Energy by Example

Recognizing the important role Perkasie Borough plays in providing electricity to our residents, we have made efforts to reduce electricity use at the local government level and will continue to research new initiatives to help reduce use.  The Borough is also encouraging all residents to visit the Borough website (click here) for energy saving tips that you and your family or business can use to cut your electric bill.   

The Borough is aware of how difficult the rate increase will be on you and your family or business.  The Borough does offer budgeting plans to home owners (but unfortunately not to renters) to help disperse the high summer and winter energy costs over the entire year.  If you have any questions or for more information on the budgeting program, please feel welcome to call the Borough at (215) 257-5065. 

Related

Electric Rate Increase Ordinance

Electric Rates

Electric Services

Article on Electric Rate Caps

Residential Electric Saving Resources

Energy Saving Tips for Businesses