PUC Formally Publishes Final Policy On Alternative Utility Ratemaking

The Public Utility Commission published notice in the August 24 PA Bulletin of its final Distribution Rates Policy Statement identifying factors the Commission will consider when utilities propose alternative ratemaking mechanisms and rate designs in distribution base rate proceedings that promotes the efficient use of electricity, natural gas or water, the use of distributed energy resources; and reduce disincentives for efficient use and resources to ensure adequate revenue to maintain the safe and reliable operation of fixed utility distribution systems.

On July 11, the Commission voted 5-0 to approve a motion by Chairman Gladys Brown Dutrieuille that establishes PUC guidelines for fixed utilities and interested stakeholders on what factors to consider when investigating alternative ratemaking methodologies in a Section 1308 rate proceeding-- including how the ratemaking mechanism and rate design will support improvements in utility reliability.

“There are considerable shifts in the rate-setting environments for electric, natural gas, and water utilities. Look no further than the increased adoption of rooftop solar, increased investment in natural gas fueled microturbine combined heat and power units, and the significant movement toward consolidation in the water and wastewater industries,” said Chairman Brown Dutrieuille in her motion.  “Recognizing these trends, amongst others, the Commission sets out with the instant proceeding.”

Chairman Brown Dutrieuille noted that during the pendency of this proceeding, Gov. Tom Wolf signed into law Act 58 of 2018 (Act 58), which gave the Commission express statutory authority to approve alternative rate mechanisms for electric, natural gas, and water or wastewater utilities – and what notices of such ratemaking requests are to be given to customers.

The Commission is finalizing the policy statement after its approval of an Implementation Order for Act 58, and careful consideration of extensive comments from stakeholders on alternative ratemaking methodologies that can further promote federal and state policy objectives, provide incentives to improve system efficiency and ensure that utilities receive adequate revenue to maintain safe, secure and reliable service.

Commissioner Andrew G. Place, in a statement of support, highlighted the opportunities to address emerging technologies in the context of alternative rate design and ratemaking mechanisms, noting, “I continue to be interested in proposals that remove barriers and provide incentives to utilize energy efficiently, encourage development of cost-effective distributed energy resources, and encourage more efficient use of our energy distribution infrastructure.”

Click Here for a copy of the final policy as published.

Documents and comments related to this action can be found at Docket No.:  M-2015-2518883.
(Photo: Solar energy installation at Tom Ridge Environmental Center, Presque Isle, Erie.)