Since Pennsylvania enacted its electricity deregulation law in November 1996, Peco Energy's stock price has bounced around like a small plane in a thunderstorm. The fingerprints on the trigger, Peco officials said, belonged to the state Public Utility Commission, which voted in December to cut the company's request for compensation for the loss of its monopoly. Although analysts had predicted a dividend cut regardless of the PUC's ruling, there is no dispute that the commission's decision will make Peco's transition more painful than it might have been. Stranded costs represent assets, such as the Limerick nuclear plant, that are expected to fall in value under competition. PUC Commissioner John Hanger, who wrote the majority opinion in the commission's 3-2 ruling, insisted last week that he had no second thoughts about his decision.
Competition requires belt-tightening in a way regulated monopolies never had.
For any company, the amount of pain or the amount of joy will depend on their ability to compete, and Peco has every opportunity to compete. And if they are a successful competitor, Peco will grow. Ironically, if Peco ends up a winner under competition, as its chairman, Corbin McNeill Jr., has vowed, its shareholders may end up thanking the PUC for giving it an early start. The last time Peco cut its dividend was in 1990, after the PUC refused to allow the utility to charge customers for what the commission said was unneeded capacity at the Limerick nuclear plant. In addition to cutting the dividend, Peco officials also began trimming costs, cutting the company's workforce by one-third.