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Taking stock of utlities

February 17, 1997

If a power company makes a decision that turns out to be a bad one, who should bear the cost - stockholders or rate payers? The answer to that question will be the key to bringing electric competition to Pennsylvania and perhaps a model for other states facing the same dilemma.

Years ago, the state's Public Utility Commission approved the PECO Energy Company's application to build a state-of-the-art nuclear plant in Limerick, a plant that has, over time, become terribly expensive to operate. PECO is deeply in debt and its customers have some of the nation's highest electric bills, according to The Associated Press.

Soon it will be possible for Pennsylvanians to purchase electricity from a variety of companies, which means that PECO's pricey power will probably not be anyone's top choice without some help from state regulators.

Tom Hill, PECO's vice president and controller, says customers should be billed for 100 percent of those costs while state Sen. Vincent Fumo, D-Philadelphia, says they shouldn't bear any responsibility, even though PECO is planning to refinance its investments - more than $3 billion worth - at lower rates.

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Both sides' arguments are flawed. Consumers do have some responsibility, because for many years, they freely accepted the regulated-monopoly system that brought them power. If nuclear power was a mistake, it was one endorsed by a commission set up by the freely elected representatives of the people.

PECO's Hill is also mistaken in saying ratepayers have the same obligation to pay off these costs as homeowners have to make mortgage payments. Those who make mortgage payments eventually own a home. Electric consumers, on the other hand, don't get to own anything but a stack of bills.

But what if they did get something for agreeing to eat those costs - something like shares of utility stock? Not only would they have an incentive to pay, but would tend to stay with PECO until their investment paid off. It might not be a perfect plan, but it's better than one that saddles consumers with the whole bill.

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