Despite the fact that there would be minimal effects on its revenue, PPL Electric Utilities expressed disappointment Friday (8/4) in the ruling by the Commonwealth Court of Pennsylvania regarding a 2004 Pennsylvania Public Utility Commission decision on the company’s rates.
The court’s ruling was based on separate appeals of the PUC decision filed by the Office of Small Business Advocate, the Office of Consumer Advocate and a group representing large industrial customers.
“We strongly believe that the PUC acted appropriately on our request,” said John F. Sipics, president of PPL Electric Utilities.
“Extensive testimony was presented on all of the issues raised in these appeals,” he said. “The testimony was carefully considered by an administrative law judge and the PUC commissioners. The PUC balanced the interests of all groups of customers and issued an order that we believe was exceedingly fair.”
Sipics said PPL Electric Utilities is assessing its legal options in response to the Commonwealth Court ruling, including an appeal to the Pennsylvania Supreme Court.
He noted, however, that the Commonwealth Court ruling should have minimal effects on the revenue PPL Electric Utilities may collect. The real effect of the ruling is on how those revenues are allocated among different groups of customers and does not take issue with the overall increase in revenues to which PPL Electric Utilities is entitled.
In December 2004, the PUC approved an increase of about $137 million in the rates charged by PPL Electric Utilities for distribution service. It was the first increase in the company’s distribution rates since 1995.
Concurrently, PPL Electric Utilities notified the PUC of the need to pass through to customers a $57 million increase in charges imposed by the PJM Interconnection — the independent operator of the regional power grid — for electric transmission services.
The new rates approved by the PUC limited increases for each group of customers to less than 10 percent.
The Commonwealth Court directed the PUC to reconsider the design of rates for each customer rate class. It also overturned the PUC decision that allowed PPL Electric Utilities to recover $11.4 million over a 10-year period in extraordinary costs incurred in repairing the electric delivery system after Hurricane Isabel in September 2003.
In the appeal, groups representing business customers raised issues regarding the allocation of PPL Electric Utilities’ costs among customer groups.
“The PUC’s decision accepted the concept of gradualism, which limited the cost burden on our residential customers,” Sipics said. “We agree with the PUC that differences in cost allocation between classes of residential and business customers will take several rate proceedings to correct.”
The PUC’s decision to allow PPL Electric Utilities to recover extraordinary storm costs is consistent with long-standing practices in ratemaking, Sipics said.
The Office of Consumer Advocate appealed that decision on the basis that those costs were incurred during a period when distribution rates were capped.
“We continue to believe that the distribution rate cap was never intended to preclude utilities from requesting the recovery of costs they incurred legitimately while the cap was in effect,” Sipics said.
“Hurricane Isabel was the most damaging storm in the company’s history,” he said. “It affected nearly 500,000 customers. Our recovery of those costs includes no interest or profit, just a straight dollar-for-dollar recovery over a 10-year period of money we already spent to restore service to our customers.”
PPL Electric Utilities, a subsidiary of PPL Corporation that provides electricity delivery services to about 1.4 million customers in Pennsylvania, has consistently ranked among the best companies for customer service in the United States. Headquartered in Allentown, Pa., PPL Corporation (NYSE: PPL) controls about 11,500 megawatts of generating capacity in the United States, sells energy in key U.S. markets and delivers electricity to more than 5 million customers in Pennsylvania, the United Kingdom and Latin America.