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Pennsylvania could lose between 34,400 and 64,500 jobs over the next seven years because its electricity market functions in a way that encourages high prices, making it tough to do business, an Alcoa Inc. executive told the state Public Utility Commission on Thursday.

David F. Ciarlone talked mainly about the aluminum company's Lancaster County aluminum rolling mill as he asked the state regulators to take steps to control rising power prices.

Companies statewide are struggling to pay market-based electricity prices set through PJM Interconnection LLC, which runs the transmission grid for Pennsylvania, 12 other states and the District of Columbia, said Ciarlone, Alcoa's manager of global energy services.

The PUC held a second hearing yesterday in Harrisburg on problems in the wholesale electricity market, and their impact in coming years in the state. Over the next few years, the rest of the state's electric utilities will shed the rate caps they've operated with since deregulation was adopted in 1996.

Using recent research by Pennsylvania State University and the PUC, Ciarlone said, Alcoa -- with a corporate center on Pittsburgh's North Shore -- estimates that tens of thousands of jobs could evaporate as businesses trim costs or shut down altogether to move to states with cheaper power.

Also, "of those lost jobs, roughly 11,500 to 21,500 will be high-paying manufacturing jobs," Ciarlone said in his testimony.

Alcoa's Lancaster plant, which spends more than $10 million a year on electricity, could face bills 67 percent higher in the PJM market, after rate caps expire at the end of 2009, Ciarlone said. More than 850 workers there produce aluminum sheet that goes into new autos, electronics, cookware and other products.

Critics say PJM's controversial "reliability pricing model" has led to higher power costs in the last two years. Power generators take part in auctions to supply electricity for a market capacity that PJM sets, as part of a system designed to spur them to build or expand their power plants, or at least keep plants running.

Duquesne Light Co. is trying to switch from Valley Forge-based PJM to another grid organization with lower costs. The Downtown-based utility along with the PUC, state consumer advocate and industrial customers are challenging PJM's policies before the Federal Energy Regulatory Commission, saying they've failed to create new generation plants.

PJM spokesman Ray Dotter said power prices in the past decade hadn't been high enough to encourage investment. "If the revenue is not there, the plants don't get built and the lights go out," he said.

The Brattle Group, a consulting firm, studied PJM's auction system this year and concluded it helped to attract or maintain power facilities with 14,500 megawatts of capacity, while another 33,000 megawatts are proposed.

Alcoa points out that it closed a smelter and eliminated 700 jobs two years ago in Frederick, Md. -- also PJM territory -- when it couldn't buy long-term, competitively priced power. Ciarlone asked the PUC to lobby FERC for changes to the PJM market, and said electric utilities should be required to offer industries and other large customers long-term, stable contracts for power.

Dotter said a group of industrial customers has been meeting with PJM leaders on possible improvements to the market system, and added, "We are open to change."

PJM industrial customers and consumer groups testified at yesterday's PUC hearing, and regulators have scheduled a third hearing on Dec. 18 for more testimony.

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