The initial focus of the Group will be return on equity (ROE), transparency in rate case settlements and the methodology used to establish returns associated with Distribution System Improvement Charges (DSIC).
The Ratemaking Working Group will be managed by the PUC’s Office of Executive Director and include representatives from consumer and small business advocates, utilities, state government and the General Assembly, industrial energy consumers, low-income advocates and other stakeholders.
Designated stakeholder groups now have 30 days from the October 24 notice to submit nominations for their members on the Working Group. The Commission will announce the full membership within 15 days after that deadline.
A Finance Subcommittee will provide additional perspectives from the credit ratings, investment banking and equity analyst communities.
The working group will then begin developing its initial report and recommendations for Commission consideration.
Documents related to this announcement can be found at: Docket No.: M-2026-3064953.
Background
On September 10, the Commission voted 5-0 to approve a motion by Chairman Steve DeFrank, directing the creation of the group.
“The world around our utility system is changing, and our regulatory processes cannot simply stand still,” Chairman DeFrank said. “Our responsibility is to make sure every dollar recovered from customers is carefully scrutinized while ensuring utilities can make the prudent investments necessary to provide safe, reliable service. This is about examining whether our ratemaking processes can be more efficient, transparent and effective – while balancing affordability with the infrastructure investment Pennsylvania needs.”
The initiative comes as utilities and consumers confront a rapidly changing landscape that includes inflation, increased customer arrearages, supply chain constraints, infrastructure needs, data center development and electric reliability concerns – factors that have increased pressure on utility costs and contributed to a significant number of proposed rate increases.
Examining Opportunities for Modernization
The Ratemaking Working Group will bring together consumer advocates, utilities, policymakers, financial experts and other stakeholders to develop recommendations for Commission consideration.
Among the issues identified for initial review are--
-- Return on Equity: Whether ROE issues could be addressed through periodic, sector-specific cost-of-capital proceedings rather than litigated separately in individual utility rate cases, along with consideration of utility performance measures such as reliability, safety and water quality.
-- Rate Case Transparency: Ways to provide greater public clarity about important financial metrics, including ROE and equity capitalization, when utility rate cases are resolved through settlements.
-- DSIC Methodology: Whether a more formula-based approach using objective economic measures could increase transparency and predictability in establishing the ROE used for Distribution System Improvement Charges.
PUC Vice Chair Kimberly Barrow, in a separate statement, outlined additional questions for the working group to consider, focusing on ROE and DSIC ROE, utility performance, market conditions and the resulting impacts on ratepayers.
Separating some complex financial issues from individual rate cases could also allow the Commission, consumer advocates and other parties to devote greater attention to utility capital investments, operating expenses, service quality, customer assistance programs and other issues that directly affect customers.
The review is not intended to overturn longstanding ratemaking principles or eliminate established financial tools.
Rather, it will examine whether Pennsylvania’s regulatory processes can be modernized to better reflect changing economic and utility-sector conditions while balancing customer affordability with the need for continued investment in safe and reliable utility infrastructure.
Documents related to this announcement can be found at: Docket No.: M-2026-3064953.
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[Posted: October 23, 2026] PA Environment Digest
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