UNIVERSITY PARK, Pa. -- Rate caps that have kept the price of electricity relatively low are set to expire, and an energy expert in Penn State's College of Agricultural Sciences urges customers, such as farmers who use a lot of electricity, to be prepared to deal with higher costs.

Depending on which utility company provides your electricity, your rate cap protection already may have already expired, notes Dennis Buffington, professor of agricultural and biological engineering. "But for the large utility companies in Pennsylvania, the rate caps still are in effect until Dec. 31, 2009, for PPL and Dec. 31, 2010, for Allegheny Power, Met Ed, Penelec and Philadelphia Electric (PECO)."

Rate caps on the price of electricity have been in effect throughout the state (with the exception of the areas served by the rural electric cooperatives) since late in 1996 when the deregulation of electricity generation was approved. These rate caps -- enforced by the state Public Utility Commission -- provide price protection for consumers. The utility companies were protected as well by the tangible and intangible transition fees (also known as stranded investment fees) that consumers paid with each monthly billing statement.

"The bottom line is that consumers have experienced no more than nominal annual price increases in electricity -- 5 percent or less -- since 1996," Buffington says. "These small increases have been occurring at the same time that prices for oil, natural gas, propane, coal and even wood have skyrocketed."

There is considerable uncertainty concerning what will happen with the price of electricity in two or three years, Buffington points out. "I have not heard any utility company or PUC official predicting that the prices will stay at the present level -- all are predicting increases in price," he says. "I have heard predictions ranging from a low of a 40 percent increase to as high as a 200 percent increase. We all know that such dramatic price increases will have a profound impact on every person and every business in the state."

Buffington offers the following advice for farmers to prepare for higher electrical prices:

--Use electricity more efficiently. Switch from incandescent bulbs to compact fluorescent bulbs for lights that are used at least three hours per day. Make sure fan blades are cleaned on a regular basis and that the fan blades are turning in the proper direction. "Whenever an electric motor needs to be replaced, be sure to replace it with a high-efficiency or premium-efficiency motor," he says. "Higher efficiency motors cost more initially, but the benefits of reduced operating expenses will quickly pay back the extra investment."

--Establish dual or triple-fuel flexibility so that you can select your energy source for heating water, drying crops and any space-heating requirements. The prices of energy are likely to become more dynamic in the future, so it will be important to be able to switch from one fuel to another depending on which fuel is cheaper at the time, based on cost per million BTU, Buffington notes. "It is only when you compare different forms of energy on the basis of dollars per million BTU that you can make true, apples-to-apples comparisons," he says.

--Manage your demand for electricity and natural gas to avoid spikes in demand. Just one spike in electricity demand in one month has a significant impact on the electricity bill for that month, Buffington points out. "If the spike occurs during a summer month in PECO territory, there is a penalty for that spike during each of the next eight months following September," he says. "Utility companies are beginning to provide services (some free and some for a fee) for a customer to monitor his/her profile of electricity use. Then it will be easier to document when the spikes are occurring and to decide what management changes are needed to reduce the probability of costly spikes."

--Keep accurate, up-to-date, easily accessible records of your energy use. Maintaining complete records of energy consumption will enable you to evaluate the different offers for energy you are likely to receive, Buffington says. Remember that the cheapest energy is always going to be the energy that you do not use because of an effective energy-management program.

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EDITORS: Contact Dennis Buffington at 814-865-2971 or by e-mail at deb2@engr.psu.edu.

Jeff Mulhollem Writer/editor 814-863-2719 jjm219@psu.edu