As discussed in our blog post last summer, the Pennsylvania Public Utility Commission (“PUC” or “Commission”) has been investigating the potential benefits of adopting alternative ratemaking methodologies over the past two years.  The PUC believes this proceeding will reveal: (i) whether other rate mechanisms may encourage utilities to better implement energy efficiency and conservation programs; (ii) whether such rate mechanisms are just and reasonable and in the public interest; and (iii) whether the benefits of implementing alternative rate mechanisms outweigh any associated costs.  As part of this proceeding, the PUC examined several forms of alternative ratemaking, including revenue decoupling, lost revenue adjustment mechanisms, and straight fixed/variable pricing, and invited members of the Commonwealth’s energy community to testify and file Comments on the merits of these proposed ratemaking methodologies.  Many of these proposed ratemaking methodologies, particularly revenue decoupling, generated spirited debate among members of the Pennsylvania energy industry.

After considering stakeholders’ initial Comments, on March 2, 2017, the Commission issued a Tentative Order indicating it will continue its “investigation into alternative ratemaking by seeking comments on, and potential processes to advance, alternative rate methodologies that address issues each utility industry is facing.”  The PUC acknowledged that not all rate methodologies and performance incentives are applicable to each type of utility or all utilities within a particular utility type.  Accordingly, the Commission issued a series of questions tailored to electric distribution companies, natural gas distribution companies, and water and wastewater utilities to assess the reasonableness and efficacy of employing certain rate methodologies tailored to each kind of utility under the PUC’s existing statutory authority.  The PUC asks these utilities to highlight what, if any, alternative rate methodologies could or should be used, and requests those utilities to denote the advantages and disadvantages of these approaches.  The Commission also requests that utilities denote the effects of proposed alternative rate methodologies on small and large customers across various rate classes.

Interested stakeholders have until Monday, April 17, 2017 to submit Comments on the PUC’s March 2, 2017 Tentative Order.  Once all Comments are filed, individuals will have until May 16, 2017, to submit Reply Comments addressing assertions made by other commenting parties.  If you are interested in submitting Comments on this issue, please contact Pamela Polacek (ppolacek@mcneeslaw.com), Alessandra Hylander (ahylander@mcneeslaw.com), or any other member of the McNees, Wallace, & Nurick, LLC, Energy and Environmental Practice Group.