PPL Electric Utilities will file an appeal Friday (9/1) with the Pennsylvania Supreme Court, asking it to reverse a recent lower court ruling that would have minimal effect on the company’s total revenue but could significantly increase rates for its residential customers.
The company will contend that the court’s decision reflects an incorrect interpretation of Pennsylvania’s Customer Choice Act and disregards decades of ratemaking decisions.
The court interpreted the act as severely limiting the Pennsylvania Public Utility Commission’s discretion to establish rate designs. The company disagrees.
The ruling, issued Aug. 4 by the Commonwealth Court of Pennsylvania, directed the PUC to reconsider the company’s rate design. At issue is how PPL Electric Utilities’ costs are allocated among customer groups.
“The Pennsylvania Public Utility Commission approved PPL Electric Utilities’ distribution rates in 2004 after a thorough review process,” said John F. Sipics, president of PPL Electric Utilities.
“The commission’s decision balanced the interests of all customer groups,” Sipics said. “We believe it was fair and appropriate, and we believe the decision should be allowed to stand.
“We also agree with PUC Chairman Wendell Holland’s assessment that the court’s decision has the potential to affect all future rate cases and to significantly increase the costs to PPL’s residential customers.”
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.
At the same time, PPL Electric Utilities notified the PUC of the need to pass through to customers a $57 million increase in charges imposed by PJM Interconnection — the independent operator of the regional power delivery system — for electric transmission services.
The rates approved by the PUC limited increases for each group of customers to less than 10 percent.
“The decision limited the burden for residential customers,” Sipics said. “We feel that undoing that decision now, more than a year and a half after rates took effect, is not the best approach.”
Instead, Sipics said, the company believes that differences in cost allocation between classes of residential and business customers should be adjusted gradually over several rate proceedings.
In addition to directing the PUC to reconsider the company’s rates, the Commonwealth Court ruled that PPL Electric Utilities should not be allowed to recover $11.4 million in costs related to Hurricane Isabel. The company’s appeal asks the Pennsylvania Supreme Court also to reverse this ruling.
Hurricane Isabel was the most damaging storm in the company’s history, affecting service to nearly 500,000 customers. The PUC allowed PPL Electric Utilities to recover the extraordinary storm costs without profit over a 10-year period.
Sipics said the PUC’s decision was consistent with longstanding ratemaking practices.
PPL Electric Utilities Corporation, 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.