Sen. Vincent J. Fumo

District Office

1208 Tasker Street
Phila, PA 19148

Harrisburg Office

545 Main Capitol
Hbg, PA 17120




Speech on the Senate Floor, November 25, 1996

Sen. Fumo made the following comments during the debate on House Bill 1509, the Electricity Generation Customer Choice and Competition Act. These comments are related to an amendment he offered that would ensure a 10% reduction in rates for every residential and small business ratepayer in the State. He offered this amendment to ensure that the consumer was the one to benefit from deregulating the electric industry. The amendment failed along party lines, 21-29.

      Mr. President, having watched with amazement the last consumer amendment fall 21-29 along party lines, I am not overly optimistic that this will not be the same. But, Mr. President, I have an obligation to come to this Chamber and try to get some of my Republican colleagues to share some compassion for the ratepayers of Pennsylvania, actually the consumers of Pennsylvania. What this amendment says is that there shall be a 10-percent reduction in the cost of electric for residential ratepayers and small business operators. Plain and simple, Mr. President, that is it.

      We have all heard the promises about what this bill will do for consumers. We have heard it is the greatest thing since sliced bread, and we have heard that from some of the highest paid lobbyists in America, hired by the utility companies to sell us that snake oil. Now, Mr. President, I do not necessarily believe that this bill is going to help out Joe Lunchbox going to work tomorrow morning if he has a job. Mr. President, what we say in this amendment is that we are at least going to guarantee that there will be a 10-percent reduction in rates for every residential and small business ratepayer in Pennsylvania, the argument being if the huge corporations, i.e. public utilities, are going to save billions of dollars, they should at least share some of that money with the people who give them profits.

      Mr. President, this is a unique business, generating electricity. It is not like any other, because it is a monopoly. And I think it is important to talk about monopolies in order to explain this amendment. When you are the only person who practically can perform a service, you are then considered a monopoly. Many years ago when technology was not available as it is today, we said there is only going to be one power line up there, and only one company generating that electricity. But, because of that, the public needs protection from this monopoly because obviously if they are the only one in town, they have you where they want you, and they can raise your rates to the point that you will go bankrupt.

      So we set up the Public Utilities Commission to regulate by law those monopolies. There are many people in Pennsylvania who pay electric bills and phone bills who kind of think they do not think we did such a good thing for them. They look at that utility bill every month and wonder why am I paying this kind of money for electricity? So there should be some suspicion on their part when we tell them in this particular bill that the most important issue to be decided, that being the issue of stranded costs, will be determined by the Public Utility Commission, the same commission that took not very well the pressure of those utility companies in the first place to allow them to build these huge plans that now give us enormous excess capacity.

      Mr. President, this is the only business in the free world where the people who own the company, the shareholders, get guaranteed profits, but where there is a loss, it is paid for by the consumer. Only the utility companies would have the audacity in a free enterprise system to demand that.

      When that happens in any other business, we lose our money. The shareholders who invested their money with the company lose their money. That is the American way. You put your money up. If you win, you win. If you lose, you lose. It is called risk. It is called risk capital. It is called venture capital in those areas where the venture really is a little hairy and you do not know where it is going to work. But, Mr. President, under this bill, what happens is this: Utility companies came in years ago and said, we want to build, and I know in the case of PECO in southeastern Pennsylvania, we want to build Limerick II. We want to build a nuclear power plant. We just got one. We think it would be good to build two. They decided to build two. Well, as it turns out a few years later, that management made a mistake. In fact, some of that management is no longer there.

      This bill says they can take all those losses, money they invested, which is called stranded costs, and they can bond it, they can get a bond issue and now pass those costs to the ratepayers. Right now, ratepayers are paying some of those stranded costs because the PUC has to, by law, let them do that. And I remember a discussion with one of the lobbyists when I told him it is unfair for you to ask consumers now to have to pay for these huge generating facilities when you made the mistake of building them in the first place. You know what they had the audacity to tell me, Mr. President? They told me , we did not want to do this. The PUC told us to do this. Therefore, the public ought to pay for this.

      Mr. President, I know there are a lot of arguments in favor of term limits. People say we have been around here too long. Well, today is one of those days when it is beneficial to have been around here for a long time, because, Mr. President, I was a Senator when PECO decided to build Limerick. I sat in my office and I was lobbied not only by their lobbyists but by their chief executives and everybody they could throw at me, and I was not alone. Everybody was lobbied. And it was not just one-sided Republican fat cats from utilities. The building trades were in there, too, because they were building this monstrosity. And they said, look, we need the PUC to allow this, to tell them to do so we could get some jobs. And reluctantly some of us did call that PUC and lobby for them. Some of us did not.

      Mr. President, nobody from the PUC told these utilities to build these power plants. These utilities lobbied for that because they thought they were going to make a killing, and now they find out, Mr. President, that that is not going to happen. And they have come to us and asked us to bail them out, not with taxpayer money like the S & L scandal, this time with consumer money. Ratepayer money. Well, let me tell you what happens to the guy who works in the factory and brings his lunch to work every day in a paper bag or a lunch box. He does not care if his utility bill goes up $10 or $20 or if his taxes go up $10 or $20; he does not want to pay the $10 or $20 period. And, Mr. President, in a free enterprise society, in a capitalistic society, one that conservative Republicans are usually defensive of, Joe Six-pack and Joe Lunchbox would not have to pay the increase in their utility rates or their taxes. The people who would pay would be the ones who took the gamble when they said this was going to generate all this electricity.

      But under this bill, that is no longer the case. So we now come today and argue on behalf of those ratepayers, on behalf of those consumer bill payers. What this says is that at least that individual will get a 10-percent reduction guaranteed in his rates.

      Now, you might say, oh, this is unfair. This is unfair that we would make utilities give something back to the ratepayer. Mr. President, we did it to the insurance companies. When we passed so-called automobile insurance reform, we built in a 10-percent reduction in rates, and not one insurance company went bankrupt, and the rates went down, and on that day all of us went out of here and rightfully got a pat on the back from our constituents that we had finally done something for them that they could see. This does the same thing.

      Mr. President, however, because we want to be fair about it, we recognize that there are some power companies in Pennsylvania that have extremely low rates. West Penn Power comes to mind. Their shareholders and management did not go on the foolhardily experiment of billions and billions of dollars for nuclear power plants. They said all we want to do is provide enough power for the people who use it and do it as cheaply as possible. Mr. President, we have no doubt that if we forced a 10-percent reduction on them, they could not sustain it. We know full well that PECO in southeastern Pennsylvania could easily withstand a 35-percent reduction. So what we said in this bill is, if you are a utility that cannot do this and you can then go to the PUC and tell them I cannot lower these rates 10 percent, I need some relief from this mandated reduction, and the PUC is empowered to give you that relief.

      Mr. President, the single greatest deterrent to job creation in southeastern Pennsylvania and therefore this entire Commonwealth has been the high, exorbitantly high, electric rates charged by PECO, formerly Philadelphia Electric. Mr. President, the bill without this amendment does nothing to solve that problem. If you want job creation, and we all know full well that the overwhelming majority of jobs that are created in this Commonwealth are created by small businesses, then you will join with us and give those small businesses a 10 percent reduction in their rates so they can succeed and flourish and hopefully more will sprout up. The big utility users, Mr. president, are already going to be able to wheel their energy direct. They do not need reductions because they are already getting reductions. They can go on interruptible power sources if they use over 10 megawatts of power. They already have available to them discounts and bonuses and savings that the guy who comes home from the factory every night does not.

      Mr. President, I would like this to be 20 or 30 percent. I think it might be able to be those kinds of numbers, but we reduced it to only 10 percent because we did not want to be criticized here as being irresponsible on behalf of consumers and taxpayers. Mr. President, we had hoped that by doing that we would have reached a compromise and that people on that side of the aisle would have been able to show their concern for their constituents rather than their contributors. But I do not doubt that this amendment will fall just like the last one, right along party lines - Republicans voting to kill it, Democrats voting to help consumers.

      Mr. President, one of the biggest things that differentiates Democrats from Republicans when they are elected is that we do not forget where we came from. We remember our roots, we remember the people who sent us here, we remember to take care of them whenever we can, and we try to do it in a responsible fashion. When you are going to give the utility companies a windfall like this, it is unconscionable not to force some of that to be shared with the taxpayers, the ratepayers, and the consumers of Pennsylvania. As I said, I know you will not, and as I said before, this will help me see something in my lifetime I was not sure I would see, and that is a Democratic Majority.

      Thank you, Mr. President.

Copyright 2000 Sen. Vincent J. Fumo