Energy to play big area role
January 1, 2010
Peter Key, Philadelphia Business Journal
Changes in how energy is produced and paid for will have a big effect on the area this year and for the foreseeable future.
The biggest change will come at the end of the year when Peco Energy Co.'s rate cap expires, but reduced demand for energy, energy-conservation efforts, and efforts to make Pennsylvania a center for renewable-energy industries will make their mark on the area this year and the rest of the decade, if not the century.
The area is "in the midst of a transition from kind of the old energy paradigms to the new paradigms," said Steve Wray, the executive director of the Economy League of Greater Philadelphia.
That certainly is the case at Peco, which is in the last stage of transition from an age when it and similar utilities produced power as well as distributed it.
That age came to an end in Pennsylvania in late 1996, when the electric-power industry was restructured in the state. The legislation that did that capped the rate Peco charges for power, which makes up about 70 percent of a typical consumer's electric bill, through the end of this year.
At this point, with the expiration date in sight and Peco having some long-term power-purchase contracts lined up, the Philadelphia-based utility thinks the amount it charges for power will increase 10 percent to 15 percent.
"That's a reasonable increase if you consider that the prices have been at 1996 levels now ever since 1996," said Jan Jarrett, president and CEO of Citizens for Pennsylvania's Future, an environmental group.
Peco is helping consumers prepare for the rate cap expiration through an early phase-in program that allows them to pay extra on their utility bills now, while earning 6 percent interest from Peco, and use whatever they've accumulated to offset the cost increase when it kicks in next January.
It also is rolling out a host of energy-conservation programs, under which it is offering discounts on compact fluorescent light bulbs and other energy-saving items, and providing customers with information they can use to save energy.
Large businesses that use a lot of power have been able to purchase it from suppliers other than Peco for a while, but consumers have largely had Peco and some green power suppliers to choose from.
That's because the rate cap and the high cost of wholesale power in recent years has made it difficult for other power suppliers to match the price Peco charges for electricity.
The expiration of the rate limit will change that. As the date of it nears, consumers and small businesses will be getting offers from companies besides Peco to provide them with electricity.
For that and other reasons, the cap coming off likely won't have much of an effect on businesses in the area, said Phil Hopkins, the director of research for Select Greater Philadelphia, which is an arm of the Greater Philadelphia Chamber of Commerce.
The office-space market is weak enough that landlords may eat some of the cost for companies that rent their space, Hopkins said.
Also, Pennsylvania customers on average are paying 5 percent less for electricity than the nation as a whole, according to Citizens for Pennsylvania's Future, so the increase won't put businesses in the region at a big disadvantage compared to competitors located elsewhere.
The coming search for lower-cost power is one reason Exelon Generation Co., which, like Peco, is owned by Chicago-based Exelon Corp., is closing its Cromby Generating Station on the Schuylkill River in Phoenixville and decommissioning two generators at its Eddystone Generating Station on the Delaware River in Eddystone.
Those moves will eliminate 280 positions, although Exelon Generation is trying to relocate the affected workers to other jobs within it or other Exelon units.
In addition, the area will start off the new decade with two fewer oil refineries and 950 fewer refinery jobs than it had at the beginning of last year because of Sunoco Inc.'s decision to close its Eagle Point refinery in Westville, N.J., and Valero Corp.'s decision to close its refinery in Delaware City, Del.
The area hopes to counter those job losses through efforts to make it, and the entire state of Pennsylvania, a center for alternative energy companies.
Those efforts helped convince Spanish wind-energy company Gamesa Corporación Tecnológica to locate its headquarters and a manufacturing plant in the area in 2006, although it has shed jobs at both since the recession began as a result of reduced energy demand.
They also helped convince HelioSphera, an Athens, Greece, maker of solar panels, to say it will open a plant that will employ 400 in the Philadelphia Navy Yard.
http://philadelphia.bizjournals.com/philadelphia/stories/2010/01/04/story3.html?b=1262581200^2665541