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Competitive energy and electricity costs for our region have been a particular priority for the Conference and its Affiliates because of the role they play in a firm’s overall cost structure. The issue has been more intense due to severe cost increases caused by the deregulation of the electricity market.
The Challenge:
Electricity can represent up to 30 percent of production costs for a typical manufacturer, and many simply cannot afford to continue operations if prices continue to rise. In southwestern Pennsylvania alone more than 43,000 residents are directly employed in energy intensive industries, and high electricity prices are putting their jobs at risk. Industrial users need access to predictable, competitive electricity prices in order to plan growth and investment in Pennsylvania.
Deregulation of the electricity industry has had unanticipated effects and has not yet brought the benefits to manufacturers witnessed in the deregulation of other industries. Industrial users in southwestern Pennsylvania face three problems:
- fluctuating prices from the pricing model used in the regional market
The Solution:
Key findings from a Carnegie Mellon Electricity Industry Center study, “Competitive Energy Options for Pennsylvania" (PDF file),” provide the context for good decisionmaking. They are:
- A five percent demand reduction will cause an estimated net annual benefit of more than $1 billion. Demand reduction programs save money for all customers, along with those that reduce their consumption, because the need to use more expensive sources of generation to meet a high demand is reduced or eliminated.
- Options exist for cost-effective generation. Through the use of technologies such as coal gasification the region can capitalize on its assets, while new options, like micro-grids and co-generation, could help to control costs for large industrial and commercial customers.
- A compulsory solar mandate will raise prices. The Pennsylvania Alternative Energy Portfolio Standard mandate of 800 MW of solar power after 2015 will raise prices more than if other renewable sources, like wind, were used to meet this requirement.
The Conference is working with the following goals:
- realize more competitive electricity costs in southwestern Pennsylvania by leveraging Pennsylvania’s indigenous resources and technical expertise
- lead the nation in wealth creation and economic growth through new energy innovations
- find new technology solutions through research and development to radically reduce the level of CO2 emissions into the atmosphere
Recent Success:
A step toward a competitive electricity rate landscape for large industrial electricity users was taken with the passage of the Electric Generation and Customer Choice Act in July 2007, which improved opportunities by:
- allowing utilities to offer these customers long-term, fixed-rate contracts
- providing utilities with the flexibility to procure cost-competitive, wholesale power
- prohibiting utilities from allowing any customer class to subsidize another
Regional and statewide momentum for this bill picked up speed in 2006 with the successful Energy Summit 2006: Generating Ideas for Southwestern Pennsylvania presented by the Conference and the Pittsburgh Technology Council in October 2006.
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