Coming Changes to Natural Gas Competition in Pennsylvania
March 5, 2015
Legislation has been passed by the Pennsylvania House of Representatives on March 4, 2015 that would make significant changes to natural gas competition in Pennsylvania:
First, the legislation (House Bill 57, Printer’s No. 49) would eliminate the migration rider charged to customers who switch to a competitive supplier. The current law requires Natural Gas Distribution Companies (NGDCs) to establish Migration Riders for an appropriate period. In the place of the migration rider, the legislation would permit an NGDC, upon approval from the PUC, to include a non-bypassable charge on all customer bills in the event that a large number of customers migrate to competitive suppliers all at once. This change should ensure that the entire costs incurred by the NGDC to purchase gas supply is not borne by a small number of non-shopping customers.
Second, the legislation clarifies that an NGDC may recover all reasonable and prudent costs incurred to implement customer choice. This would include necessary operational and billing changes as well as customer education initiatives. The costs would be recovered by a reconcilable automatic adjustment clause. That method of cost recovery is similar to that provided to Electric Distribution Companies (EDCs) to implement the Electric Choice Act and Act 129 of 2008. See 66 Pa.C.S. § 2806.1(k).
Third, the legislation would eliminate the current interest rate structure and move to a market based structure. The current law provides that recovery for under-collection includes “the legal rate of interest plus two percent.” In place of the “legal rate,” the legislation would use the prime rate for commercial borrowing. This change should minimize over and under collections, and make it easier for customers to make an “apples to apples” comparison between the gas supply rates offered by an NGDC and competitive suppliers.
This legislation must still be considered by the Senate. Once passed in final form by both the House and the Senate, the legislation will be sent to the Governor for his consideration. The Governor, after referring the bill to the Attorney General to certify its legality and constitutionality, can either sign, veto, or take no action on the legislation.
If you have any questions on HB 57, please contact Dan Clearfield at (717) 237-7173 – dclearfield@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.