A new Pennsylvania state law, Act 58, gives utility companies the option to propose new rate-making structures. This new flexibility will help utility companies like PPL Electric Utilities adjust to changes in the industry while keeping service strong.
Here’s an op-ed piece by PPL Electric Utilities President Greg Dudkin that appeared on PennLive July 13, under the headline “This is how a new state law is helping Pa. utility consumers.” Some details are specific to the Harrisburg area, but the basic idea is the same for all parts of our service territory:
On a recent scorching July morning, many Perry County residents were getting ready for work or making their kids breakfast when, without warning, hairdryers clicked off, refrigerators stopped running, and air conditioners shuddered to a halt.
A tree had fallen on a power line, blacking out 788 customers. But, in just four minutes, half of those households had their power back and felt the cool air flowing again, thanks to PPL Electric Utilities’ smart grid technology.
Investments in smart grid, stronger poles and wires, and other upgrades to electric infrastructure are crucial for everyone. Not just because we all want to live our lives with the fewest power outages possible, but also because customers demand and deserve electric service to be affordable, safe, and secure from outside threats.
This is why the recent passage of alternative rate making legislation (now known as Act 58) is such a positive step for Pennsylvania utility customers – a step needed to ensure that utilities can keep the grid strong and adapt to a changing energy landscape.
Due to efficient appliances and smarter energy use, electricity sales are starting to decline for some utilities. Despite declining revenues, customers still rightly expect fewer interruptions, quick outage responses, and safe service.
In addition to more efficient homes, changes are also happening in renewable generation.
Alternative sources – like solar panels – are being installed on-site at more homes and businesses. We welcome and support this trend. It’s clear that our grid, and the manner in which PPL operates it, needs to be able to handle two-way power flow and evolving energy technologies.
For this to happen, utilities have to move beyond the traditional model that links utility revenue directly to how much power customers use.
Signed by Gov. Wolf in late June, this forward-looking legislation (originally House Bill 1782) allows new rate structures – such as decoupling, multi-year plans, and performance-based rates – while continuing to ensure strong consumer protections.
No utility will be forced to take on new rate structures. Any alternative ratemaking proposed would have to be approved by the Public Utility Commission, just like in rate cases today. The Commission will continue to hold utilities accountable and regulate profits.
Decoupling, one form of alternative ratemaking, is already working in 18 states. It works by breaking the conventional link between utility revenues and the amount of power used.
The grid needs to be safe, secure and ready to meet customer needs – regardless of how much electricity any one customer might use or whether they generate power from sources like solar panels that flows back onto the grid.
The new law addresses what customers pay for electricity delivery. The separate generation charge on a monthly bill, what a customer pays for the electricity itself, is not affected by this legislation.
Under the law, any multi-year plans proposed will have to spell out how much a utility intends to spend each year and where they intend to spend it. The utility would then be allowed to collect only the authorized amount.
Customers who use less electricity will still pay less. Alternative ratemaking will not cause rates to increase faster than they would have under today’s system.
Alternative ratemaking will allow utilities to continue adding technology and upgrading infrastructure to reduce customer outages and keep service safe.
It will ensure that newer customer-owned technologies and renewable sources can be integrated seamlessly into the grid, benefiting the environment and the customers who install them.
And, it will benefit all customers by ensuring that utilities have the vitality and funds needed to continuously keep pace with needed changes.
Alternative ratemaking means customers will be able to rely on an electric grid that works with new technologies and reacts seamlessly and reliably – even when wind isn’t blowing or the sun isn’t shining.
It will allow customers to continue living their busy lives, uninterrupted.