PPL asking for new charge to recoup repair costs more quickly
When PPL customers pay their electric bills, a good portion covers repair and replacement of poles and wires the company performed as many as three or four years ago.
But under a pending new addition to electricity bills, customers will be paying for work done more recently, even within the past few months, and PPL will get its money back more quickly.
The state Public Utility Commission gave PPL the OK to institute a distribution system improvement charge - or DSIC - sometime in 2013. PPL will be able to collect as much as 5 percent more from customers. The company expects to make the request, and the specific amount, sometime next week.
The DSIC will be a percentage of the distribution and customer charge portions of the bill and the total impact on the typical residential user is likely to be no more than a few dollars per month.
The commission's nod to PPL comes just weeks after granting PPL an increase that drove up the flat monthly customer charge 62 percent from $8.75 to $14.09 per month. Also, the commission allowed the utility a fractional decrease in the distribution charge levied on a per kilowatt basis, from 2.55 cents to 2.51 cents. The changes make a much smaller impact on the overall bill, the bulk of which is the cost of the electricity itself. Electricity prices have been falling, making the PPL's increases and the pending DSIC less obvious.
A law passed by the state General Assembly and signed by Gov. Tom Corbett last year opened up the DSIC option for natural gas and electric utilities.
PPL is the first electric or gas utility to get a long-term infrastructure improvement plan submitted and approved by the commission. In its petition, PPL outlined the stepped-up work that will be done with cash from the new rate, including replacing 4,000 poles at a cost of $24 million. Underground residential cable will be swapped out for $51 million. Overhead copper wire will be replaced for $29 million. Replacement of 230 substation circuit breakers will cost $21.8 million.
Over five years, the company will spend $705 million, said PPL spokesman Bryan Hay.
Under the current practice, rates revenue reimburses the utility for improvements made in the past - usually over the course of the years since the last rate increase. The utility has to borrow money to make those improvements or pay for storm damage. They keep track of that money and present it to the commission when it asks for the next increase. Ultimately, ratepayers foot the bill for all utility operations and improvements, including the interest the utility pays as it makes improvements or repairs.
By establishing a DSIC, utilities get to recoup the cost more quickly than through traditional rate cases, which happen every two to four years.
Under DSIC, the utility can recoup costs every quarter and even increase or reduce the DSIC rate with only a cursory review from the commission. That's why acting state Consumer Advocate Tanya J. McCloskey is reserving judgment.
"The General Assembly and the utilities say consumers will get more timely repair of aging infrastructure - that is the intent," she said. "Our office has been more cautious about the use of DSIC, and we will make sure utilities live up to the intent of the law."
Some Northeast Pennsylvania households have been paying DSIC rates to another utility, Pennsylvania American Water Co., which argued it had to hasten the replacement of aging waterlines.
UGI, the major provider of natural gas to the region, does not have plans to purse a DSIC.
"Things may change in the future, but right now it is not something we are actively pursuing," said UGI's Joe Swope.