NewEnergyNews: ORIGINAL REPORTING: Pennsylvania utilities push back on 'prescriptive' ratemaking regulation

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    Wednesday, May 01, 2019

    ORIGINAL REPORTING: Pennsylvania utilities push back on 'prescriptive' ratemaking regulation

    Pennsylvania utilities push back on 'prescriptive' ratemaking regulation; The passage of Act 58 gives state regulators authority to approve alternative rate mechanisms, but utilities say a proposed policy statement is too heavy-handed.

    Herman K. Trabish, Nov. 6, 2018 (Utility Dive)

    Editor’s note: PA stakeholders continue to work to identify the most efficient ratemaking designs.

    Pennsylvania lawmakers passed Act 58 (House Bill 1782) into law in June, which allows the Pennsylvania Public Utility Commission (PPUC) to approve rate mechanisms that have been under study in an alternative rate mechanisms proceeding since 2015. The Act allows for more ratemaking flexibility than the proceeding, including revenue decoupling, performance-based rates, formula rates and multiyear rate plans. Utilities say the commission policy statement about the rate mechanisms is a distraction from actually implementing Act 58 in a way that better aligns utility earning opportunities with customer demand. Other stakeholders, including clean energy advocates, say the commission's policy statement should be rewritten to guide utilities toward the best use of the new mechanisms in ways that could drive adoption of new technologies like distributed energy resources (DER) and electric vehicles.

    Just and reasonable rates" that lead to "innovations in utility operations" are "in the public interest," the text of Act 58 begins. It defines four specific mechanisms: revenue decoupling, performance-based rates, formula rates and multiyear rate plans. But it also allows utilities to be innovative in how they use DER and other energy efficiency technologies to derive earnings through combined rates and other ratemaking mechanisms. It essentially outlines the commission's opinion of the value of some alternative rate methodologies described in Act 58 and describes how they can be used in ratemaking and rate design and illustrates ways utilities might propose them in base rate cases. The commission's filing includes a description of the mechanisms and the proposed policy statement which, if approved by the commission, would become a Pennsylvania regulation. The policy statement invites utilities to use their current rate cases to propose incentives for meeting policy objectives and proposes principles to guide utility rate proposals including variations of demand based and time of use pricing options… click here for more

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