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Alternative Utility Ratemaking Bill To Encourage Conservation, Infrastructure Investment Signed By Governor

Gov. Tom Wolf late Thursday signed into law House Bill 1782 (Delozier-R- Cumberland) authorizing alternative ratemaking by the Public Utility Commission for utilities it regulates, including electric, natural gas, water and wastewater services.

In the energy context, the bill is designed to allow utilities to encourage energy efficiency improvements, distributed and renewable energy projects.

The bill would allow the Public Utility Commission to approve the use of alternate ratemaking mechanisms by utilities, such as decoupling, performance-based rates, formula rates and multiyear rates.

It does not add to the amount a company is approved to earn or recover from ratepayers. This continues to be determined by the PUC. It also does not change the type of costs that may be recovered by a utility through rates.

The bill clarifies the PUC’s authority to approve the use of alternative rate mechanism. These mechanism could be used to recover capital costs and expenses to provide service as they do now, and the PUC retains the ability to approve such recovery.

A Senate Fiscal Note and summary is available.  The bill is now Act 58 of 2018.

PUC Statement

In a statement issued Friday, the Public Utility Commission said it will now begin the process of implementing Act 58.

Act 58 allows public utilities to petition the PUC to consider various alternative ratemaking mechanisms as part of utilities’ base rate proceedings, including: decoupling mechanisms, performance-based rates, formula rates or multiyear rate plans, or a combination of those alternatives. 

The Commission will now carefully evaluate how to best implement these changes to the Public Utility Code, while continuing the PUC’s underlying mission to ensure safe and reliable utility service at just and reasonable rates.

All interested parties should be aware that the alternative ratemaking mechanisms authorized under Act 58 must be proposed within the confines of a utility base rate case under Chapter 13 of the Public Utility Code. 

The Commission has a well-established process for reviewing base rate cases, which provides for hearings concerning the lawfulness and appropriateness of proposed rates, including proposed alternative rate mechanisms. 

Interested parties may respond to a utility’s application for alternative ratemaking by filing a complaint or intervening in a base rate case and addressing an alternative ratemaking proposal, including proposing and justifying any customer protections they consider appropriate.

Act 58 does not change this Commission process. The PUC’s current process for ratemaking is detailed in a recently-released “Guide to Utility Ratemaking,” which addresses many innovations that have made Pennsylvania a national leader in the field and contains a thorough guide to the procedures used by the Commission to set rates.

The Commission noted it has an alternative ratemaking process already underway to codify the necessary framework and consumer protections of alternative rate mechanisms in any future base rate proceeding, including soliciting public comment on a proposed policy statement, policies that support the continued efficient use of all energy resources; targeted investment in distribution infrastructure to address the evolution of a distributed energy environment; and the encouragement of least-cost solutions. 

With the enactment of Act 58, the Commission is evaluating how to coordinate this alternative ratemaking policy statement process with implementation of the statute.

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[Posted: June 29, 2018]


7/2/2018

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