Electricity bills keep going up, and Pennsylvania consumers are feeling the pain. For example, in Pittsburgh last year, many residents saw bills skyrocket 15% in June and more than 10% in December. Instead of embracing reforms that could lower prices, the state’s elected leaders are engaging in petty political games. Democratic Gov. Josh Shapiro’s recent letter to utilities, urging them to halt rate increases, does more to score political points and generate headlines than to deliver meaningful relief to Pennsylvanians struggling to pay the bills.
The governor has called on 24 Pennsylvania-based utility companies to “control costs” and justify rate requests that, in his view, place too great a burden on consumers. It’s an understandable political message at a time when families are feeling the squeeze. But it’s also one that fundamentally misunderstands how the system actually works and what is actually driving rate increases.
In Pennsylvania today, utilities are largely prohibited from competing to generate electricity. Instead, the Commonwealth is tied into a regional grid operator called PJM Interconnection, which maintains policies across multiple states limiting utilities’ ability to build new power plants. These rules have the effect of shielding independent power producers from competition and giving them an artificial advantage in power generation. The result is a system that is far less competitive than advertised. Unsurprisingly, surging demand without adequate accompanying supply is resulting in retail electricity price increases of 15-25% per year in PJM states.
In response to these issues, PJM is scrambling to keep costs under control. On May 6, Reuters reported that PJM “is considering market changes that could reshape how electricity is bought and sold across its system.” One idea “would require most electricity in PJM to be sold through long-term contracts between suppliers and wholesale buyers at fixed rates, with the capacity market continuing to operate on a smaller scale.” Another pathway would have PJM stakeholders deciding “whether to limit what they pay for capacity in exchange for also limiting the reliability of their electricity supply.” These proposals, which amount to rearranging deck chairs on the Titanic, all have one thing in common: they fail to address the elephant in the room. Until PJM states allow utilities to compete in power generation markets, demand will continue to outstrip supply.
PJM understands the supply problem…to a point. As The Center Square recently reported, for the first time in four years, PJM has “announced that 811 new generation projects want to connect to the grid through the first cycle of its reformed interconnection process.” These projects may sound promising, but all include the same incumbent providers shielded from competition. Profiling the “diverse mix of resources lining up to connect to the grid” obscures the true lack of competition in PJM states.
In addition to ignoring this critical supply issue, the governor is stepping into an area where he simply does not have authority. In Pennsylvania, rate-setting is the responsibility of the Public Utility Commission (PUC), an independent body tasked with making decisions based on evidence and established law. By publicly signaling opposition to certain rate outcomes, the governor risks undermining the PUC’s independence and injecting politics into what is meant to be a technical and fact-driven process. While the PUC’s decisions cannot truly substitute for market-based pricing, pricing under political pressure is a far worse outcome than independent PUC decision-making.
The governor even wants the General Assembly to fundamentally dictate how return on equity (ROE) is calculated to already regulated services immediately upon becoming law. That’s right: a statutory, mandatory ROE applied to every regulated service immediately like water, gas, and electricity. This type of legislation has never been enacted anywhere in the U.S. before and would almost certainly stymie power supply.
If the goal is truly to lower electricity costs, the focus should be on expanding supply in Pennsylvania and encouraging investment in new generation across the state by bolstering genuine competition in power generation. That includes reexamining rules that prevent utilities from building and owning power plants alongside independent producers. A more balanced approach would increase reliability and help stabilize prices over time.
Efforts to cap returns or pressure utilities may be politically appealing, but they do nothing to address the underlying dynamics driving higher bills. Shapiro’s letter may generate attention, but it will do little to keep the lights on or prices down.
