Recent Base Rate Case Settlements
September 11, 2015
PPL Electric Utilities Corporation (“PPL”) and PECO Energy Company (“PECO”) recently reached full settlements of their respective base rate case proceedings and have submitted the settlements to the Pennsylvania Public Utility Commission (“Commission”) for approval. In addition to agreeing to reduce its overall rate increase request by 16%, PPL agreed to reduce its proposed increases to most customer charges and, significantly, to maintain its residential customer charge at its present level. Similarly, PECO agreed to reduce its overall rate increase request by 33% and to reduce its initially proposed increases to its residential and commercial customer charges.
If the fixed portion of a customer’s bill increases, a customer has less control over his or her own electric bill. Increases to fixed customer charges can also distort price signals, effectively lowering the demand for energy efficiency measures. Since the settlements (if approved) reduce PECO’s and PPL’s initially proposed fixed customer charges for some rate classes, customers in those rate classes will have more incentive to implement energy efficiency measures than if the Commission had implemented PECO and PPL’s initially proposed rates.
Importantly, both PECO and PPL agreed that by March 1, 2016 they will hold collaboratives on revenue decoupling. Decoupling eliminates the relationship between revenues and sales volume, removing the disincentive for utilities to encourage energy efficiency, conservation and distributed energy, such as solar or CHP. Revenue decoupling has not yet been implemented in Pennsylvania but other states have successfully implemented decoupling policies. Pending approval by the Commission, the collaboratives will give stakeholders an opportunity to explore the potential benefits of revenue decoupling. While customers in some PECO and PPL rate classes will face short-term increases in fixed charges under the settlements, the revenue decoupling collaboratives hold the prospect of a path forward to developing a better, more alternative energy friendly approach to ratemaking.
If you have any questions about the settlements, please contact Dan Clearfield at (717) 237-7173 or dclearfield@eckertseamans.com or Sarah Stoner at (717)237-6026 or sstoner@eckertseamans.com.
This Eckert Seamans Energy and Utilities Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice.