University Park's electricity costs could increase by $18 million during the next two years because of a recent ruling by the state Public Utilities Commission (PUC), university officials said Thursday.
The cost increase could potentially result in students being charged about $265 more per year, university spokeswoman Lisa Powers said.
Penn State's fixed rate on electric bills for Allegheny Power, which supplies power to the University Park campus, is set to expire Dec. 31 -- two years before any other Allegheny customer in the state, said Doug Colafella, Allegheny's corporate communications manager.
Once the fixed rate caps expire, Penn State will be required to pay the market price of about $9 million more per year for electricity, Powers said.
"We don't believe that Penn State students should be the only electric customers in the state to pay more before everyone else does. That's just not fair, and we are prepared to fight for our students," Powers said.
Powers said she didn't know what Penn State currently pays in electricity bills.
Penn State will be required to pay the money because it opted to pay off its stranded costs -- which are additional costs "related to going into a deregulated market" -- in bulk between 1999 and 2003 to save money, Colafella said.
The university was the only Allegheny customer to do so, Colafella said.
Colafella said because Penn State has already paid off its stranded costs, there is no reason the university should not be charged the market rate for electricity this year.
"For the prepayment bill, they basically got very good financial terms," he said. "They'd already paid for [the stranded costs], so it made sense for them to have their rate caps lifted."
Though the university filed a request to have the rate cap extended through 2011, the PUC ruled on Sept. 11 the university will have to pay the market price starting Jan. 1, 2009.
"Obviously we don't have $9 million just sitting around," Powers said, adding the university plans to appeal the decision. "If you didn't plan to spend $9 million in your budget, it's not there to be spent. This would be an additional burden on students."
For many years, Allegheny Power was the only power company in Centre County. When the state began to deregulate the market, allowing other power companies to compete with Allegheny, the company was allowed to charge its customers for stranded costs.
The company notified the university in 2004 that it had to apply to participate in a petition case if it wanted to extend its rate caps beyond Dec. 31, 2008, Colafella said.
But Powers said the company's notifications were unclear and did not explicitly indicate that Penn State would be paying market rates two years before any other customer in the state.
"We don't feel that that was clear," Powers said. "We feel we are being treated inequitably."
Colafella said Penn State missed the opportunity to extend its rate caps.
"They could have made an argument to participate, but they did not participate," he said.
The PUC ruled earlier this month that Allegheny Power had properly notified Penn State of the rate cap expiration, said PUC press secretary Jennifer Kocher.
"Essentially, they had the opportunity, and they knew that this was coming. We ruled that way because we felt that the evidence supported Allegheny," Kocher said.
Powers said she doesn't know for sure how the university will pay for its higher power bill.
"We're not sure where that money will come from," she said. "We really have two sources of income, and that would be tuition and the state appropriation. Our state appropriation is in no way coming up for electricity-based costs."
