Senate Bill 897 represents a costly and unnecessary abandonment of Pennsylvania’s successful competitive power market.
Despite its proponents’ spin, the legislation will raise prices, jeopardize grid reliability, and fatten the bottom line of utilities. The bill is riddled with flaws and must be rejected.
This legislation is an opportunistic attempt by some utilities to return to a time when captive customers paid above the national average for electricity and shouldered all the risks of building and operating power plants.
Amid debates over rising demand and affordability, Pennsylvania must not lose sight of the long-term benefits competitive markets have delivered to consumers.
Even with recent capacity auction increases, Pennsylvania’s electricity rates remain consistently below the national average.
Independent, competitive generators have created a massive in-state surplus of electric power while assuming all the costs and risks of building new plants. The current market fosters competition and drives efficiency, as evidenced by the state’s robust generation surplus and competitive rates.
The proposed legislation marks a major policy shift that ignores the fortunate position Pennsylvania enjoys thanks to competition. The commonwealth currently produces 40 percent more power than it needs to meet peak demand. This enviable surplus means Pennsylvania nearly always exports power to neighboring states with deficits, regardless of fluctuations in demand.
To be clear: if Pennsylvania customers are required to once again pay for new power plants built by regulated utilities, it will be to serve the electricity needs of other states — not Pennsylvania’s.
Notably, SB 897’s supporters fail to mention that utilities can already create non-regulated affiliate companies to build new power generation. In fact, most Pennsylvania utilities once owned such affiliates that competed on a level playing field with other generators. Utilities abandoned them because they were too risky and not profitable enough.
SB 897 would allow utilities to build, own, and rate-base new power plants — something they have been unable to do for 30 years. Under this bill, the risks of new generation would shift from investors to utility customers. Ratepayers would be forced to subsidize projects regardless of their performance or competitiveness, creating a risk-free environment for utilities at consumer expense.
Competitive generators, by contrast, rely entirely on market forces, assume all performance and financial risks, and have no guarantee of cost recovery.
The most recent PJM capacity auction proved that market signals are working. Competitive generators added 2,669 MW of new capacity and reversed 1,100 MW of planned retirements. New resources are being introduced, existing ones preserved, and retired capacity restored. The trend is undeniable.
Left unchecked, the utility-driven approach in SB 897 reflects pure self-interest, using consumers as shields to fund generation ventures and profits. It represents a dramatic departure from the landmark 1996 Competition Act, which has provided enormous benefits to Pennsylvania consumers for nearly three decades — and which utilities themselves once championed.
The bottom line is clear: Pennsylvania’s competitive power market is a success story. There is no reason for lawmakers to jeopardize it by supporting SB 897. Yes, challenges lie ahead. But this market structure has already weathered recessions, polar vortexes, inflation, high and low interest rates, pandemics, and natural disasters — all while delivering lower rates, record investment, and significant emissions reductions.
Pennsylvania’s competitive market is resilient, proven, and more than capable of meeting the challenges to come.