The state Public Utility Commission approved on Wednesday a distribution rate settlement for PPL Electric Utilities that will raise residential rates and lower industrial and commercial rates starting Aug. 1.
The unanimous decision comes almost three years after the PUC approved an overall rate increase of $137.1 million to recover repair costs after Hurricane Isabel, PUC spokeswoman Cyndi Page said.
The allocation between rate classes of that increase was appealed by industrial and commercial customer representatives, and the state Commonwealth Court decided PPL’s plan to not raise rates for any class more than 10 percent was arbitrary and unfair, state Consumer Advocate Sonny Popowsky said.
The involved parties agreed to the settlement, which includes millions in refunds to businesses, to average the $137.1 million over every rate class. The PUC estimated a typical homeowner’s monthly bill will increase about $4.
Though the nearly 4 percent increase might displease residential ratepayers, residential advocate Eric Epstein said the settlement “softened the blow” with “a snowflake rather than an avalanche.”
“It was the best we could do under the circumstances,” he said, but cautioned, “I have a bad feeling in the pit of my stomach that we may need to relitigate some of the same issues in the future.”
Such a legal confrontation seems imminent. State Small Business Advocate Bill Lloyd Jr. and PPL believe a rate increase currently under consideration for 2008 and one expected in about four years also will be weighted toward residential customers to equalize what businesses see as a long-standing subsidy they’ve been paying.
Dan McCarthy, a spokesman for PPL, said his company had planned to make the adjustment in several increases over about 15 years, but “the courts felt it should go faster than we had proposed.”
Cost-of-service analyses are done for every increase, he said, and “it’s been out of whack every time it’s been done. … You tended to socialize the cost over everybody who paid.”
Lloyd said the analyses were trending toward lowering small businesses’ overpayments until the 2004 approval. “So essentially what the commission did was make an overpaying class overpay by even more,” he said, which incited the appeal.
He acknowledged that companies can pass costs along to customers, but added, “don’t forget the fact that there are a lot of residential customers whose financial situation is quite a bit better than the financial situation of many small businesses.”
Popowsky believed the settlement adjusts rates evenly across all classes and that the added residential burden proposed in the increase under consideration for 2008, which would further raise residential rates 5.4 percent, is unwarranted.
“It depends on the (cost of service) analysis you do,” he said, adding that instead of allocating increases based on number of customers and peak usages, he believed they should be based on peak usage and amount used per customer to more accurately reflect energy use.
Epstein agreed with Popowsky and feared lower income customers soon won’t be able to pay their bills, but was pessimistic about whether that will make a difference in future rate cases.
“As we move toward market rates, residential customers are going to suffer disproportionately,” he said.