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Pennsylvania PUC to Explore Different NatGas/Electric Utility Rate Structures

The Pennsylvania Public Utility Commission (PUC) has scheduled a hearing in March to gather information on alternative ratemaking methodologies for the state's natural gas and electric utilities as it explores better ways to promote energy efficiency and conservation programs.

The commission said "that because of the importance of this topic," all five commissioners will sit for the hearing, which is to include testimony from a wide-range of participants.The hearing is expected to focus on several issues, including whether revenue decoupling or other similar rate mechanisms encourage utilities to better implement energy efficiency and conservation programs; whether those kinds of mechanisms are fair for consumers; and if the benefits of the structures outweigh any costs associated with implementing them.

The PUC has ruled on several recent rate case settlements, appearing less inclined to approve steep rate increase requests. Last month, it reduced PECO Energy Co.'s electric distribution rate request by 33%, approving a settlement that would allow a $127 million increase for its customers, rather than the $190 million it had filed for in early 2015 (see Daily GPIDec. 21, 2015). In early December, the commission also reduced Columbia Gas of Pennsylvania's rate request by 39% (see Daily GPIDec. 8, 2015).

At the time PUC ruled on PECO's rate request, Commissioner Robert Powelson said it was time for utilities to explore different ways to structure their rates. "The time has come to better align rate structures in a way that equally benefits all stakeholders, including ratepayers, utilities and the environmental community," he said. Powelson also currently serves on the National Association of Regulatory Utility Commissioners, which recently passed a resolution to discuss and review rate designs nationwide.

Ratemaking alternatives, such as revenue decoupling -- a mechanism that separates cost recovery from volumes sold -- could involve making consumer charges less dependent on usage, the PUC said. Advocates, the commission added, suggest that decoupling removes possible disincentives for greater energy efficiency because utility revenues are no longer directly linked to the volume of electricity or gas sold.

The hearing is scheduled for March 3 at 9 a.m. EST in Harrisburg, PA. It is open to the public. The PUC said it plans to select a diverse set of participants to testify and answer questions about the topic. All other interested parties will be able to submit comments after the hearing by March 16.

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