pa_bourbon t1_j9w9j0r wrote on February 25, 2023 at 12:31 AM

Reply to comment by Cute_Platypus_5989 in is there a reason why the citizens of Pennsylvania allow utilities to be so high? by Cute_Platypus_5989

By PUC regulation the distribution utility makes no money on the gas they distribute. They pass it through at cost. The other charges on the bill are based on convincing the PUC that the improvements they are making are necessary for continued safe operation.

Unfortunately we have a lot of old pipes in the ground that need updated. That costs money.

ronreadingpa t1_j9y5s48 wrote on February 25, 2023 at 12:33 PM

Utility isn't supposed to profit on supply, but insiders and other companies associated with possibly could. I suspect that's the situation with PPL. Something that should be investigated.

Very odd with how PPL default supply rate went from middle of the pack to the highest so rapidly this past June followed by another sizeable increase again in December.

As for utility infrastructure, much needs repair, but adding surcharges is shady verses simply raising the distribution rate directly. Maybe surcharging is a legitimate approach, but have my doubts. PUC should do more to protect both utilities and consumers.

pa_bourbon t1_j9ytdo0 wrote on February 25, 2023 at 3:53 PM

I’m in western PA. Our Penn Power rates have had similar increases in the last year or so. It’s all tied to the price of natural gas since we generate a lot of electricity with natural gas.

The war in Ukraine created a spike in global gas prices. That flowed through to your utility bills. Both electric and gas. Gas has cratered lately due to the relatively warm winter. Downward adjustments are coming.

Surcharges and weather normalization factors are all allowable and still regulated by the PUC. Utilities are switching to these since usage is dropping due to gains in efficiency. All of the infrastructure still needs to be paid for and charges that are based on consumption are too variable. So they switch to surcharges and normalization factors to try to stabilize revenue.

The US has some of the lowest fixed monthly customer charges in the world. Places in Europe charge $20-$30 a month or more as a base charge because of this same issue.

Nationally we are shutting down the cheapest most reliable source of generation in nuclear. That isn’t helping costs either.

Cute_Platypus_5989 OP t1_j9wa76b wrote on February 25, 2023 at 12:36 AM

I'm confused how does the company survive if they make no money?

pa_bourbon t1_j9wb6qd wrote on February 25, 2023 at 12:43 AM

I said they sell the gas at cost. I didn’t say they made no money.

Utilities operate on an allowable rate of return on invested capital on the allowable rate base. Invested capital to a gas utility is made up of pipes, pumping stations, valves, storage facilities, buildings and vehicles, computer systems, etc.

In a complex calculation, these assets depreciate a little of their value each year throughout their useful life. The role of the PUC is to set the allowable return on that asset base, then the utility needs to manage rates to that return in consultation with the PUC on a periodic basis.

But the gas is straight pass through at cost. They make their money on the fixed fee charged monthly and other charges on the bill (distribution charges, special riders as agreed by the PUC, etc).

Natural Gas prices have plunged recently. The commodity charges get adjusted by the PUC quarterly to make sure there is no profit on the gas. A downward adjustment is coming soon depending on your utility’s schedule.