A proposed extension of electric rate caps would bring a temporary break for customers but bankruptcy for PPL Electric Utilities, the company's president said Tuesday.

David G. DeCampli, in a prepared statement, said extending PPL's rate cap past its year-end 2009 expiration would cause PPL to lose $100 million a month.

Here's why: Starting at year-end 2009, PPL will be paying a much higher price to obtain the power it delivers, because its contract with a generating company also runs out at that date.

If its rate cap were extended, PPL would be blocked from passing along those higher power-purchase costs to customers. That would trigger massive losses, DeCampli said.

"This bill would result in a less reliable electricity system because we would be forced to cut maintenance efforts and lay off employees. In a relatively short period, it would result in bankruptcy...," he said.

DeCampli's statement came as a state House committee held a hearing on House Bill 54, which would extend decade-old caps on what utilities can charge customers. The bill's intention is to spare customers immense rate increases.

PPL has warned customers to expect a rate hike of 34.5 percent at year-end 2009, because the market price for electricity has surged while the cap has kept the price to consumers artificially low.

DeCampli said that if the state extends the cap, it will be reneging on its agreement made 10 years ago. He noted that six other electric utilities in Pennsylvania have seen their rate caps lifted as scheduled.

Extending the caps for the five other electric utilities in Pennsylvania, including PPL, would put them "in serious financial jeopardy" and "signal that Pennsylvania cannot be trusted to live up to its commitments to the state's businesses," DeCampli said.

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