Peco seeks second rate increase in two years for natural gas customers

Peco on Thursday filed for a rate increase that would boost bills for its natural gas customers by 13%, or about $12 a month for a residential customer.

The rate request, Peco’s second in the last two years, covers the cost of natural gas distribution and not the energy itself. It’s separate from the soaring cost for fuel, which was responsible for most of the 38% bill increase that Peco customers experienced last year as global energy prices soared.

The new rate would go into effect Jan. 1 2023, if it is approved by the Pennsylvania Public Utility Commission. It would generate $82 million more annual distribution revenue for Peco, up 21% from $395 milllion.

The utility serves about 540,000 gas customers in the suburbs in addition to 1.6 million electric customers, whose rates are unaffected by the gas-rate filing.

The company said it needs to increase rates primarily to invest about $300 million a year in infrastructure, including an accelerated program to replace old cast iron and bare steel gas mains with plastic pipes. The company is on pace to replace 60 miles of gas mains this year, reducing leaks of methane, a powerful greenhouse gas.

“Through that program we’ve reduced emissions by 25% since 2015 and are on target to reduce emissions by 50% by 2030,” said Richard G. Webster Jr., Peco’s vice president of regulatory policy and strategy. Peco aims to replace all its cast iron and bare steel mains by 2035.

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By the end of this year, Peco also aims to complete a program to replace all bare steel service lines, the smaller pipes that connect customers to Peco gas mains. Uncoated steel pipes, which are prone to corrosion, were used extensively in natural gas pipelines until the 1960s.

The rate request also includes about $500,000 to support energy-efficiency investments for low-income customers and to provide rebates for high-efficiency appliances, and $500,000 for small-business grant program that includes a $500 bill credit for qualifying small businesses.

“We continue to support our small businesses as they continue to work to recover from the impact of the pandemic,” said Funmi Williamson, Peco’s chief customer officer.

A typical Peco small-business customer would see a monthly bill increase of about $30.85 a month, or about 7.3%.

Under its proposal, Peco would increase fees it charges based on consumption as well as increase the monthly fixed customer charge for residents from $13.63 to $18.50. That would continue a trend among public utilities to stabilize their income by shifting more revenue to fixed fees rather than charges based on energy usage.

Webster said that the company is aware of public unhappiness about rising energy costs, and that Peco’s rate increase request may be poorly received. “But it is important to continue to provide the funding for our investment in our infrastructure,” he said.

The PUC last approved a Peco rate increase in 2021, which provided Peco a $29.1 million increase in annual operating revenues, less than half the $68.7 million increase requested. It was Peco’s first rate increase in more than a decade.

Rate increases apply only to the charge Peco assesses for delivering energy, which are listed on its bill as gas delivery charges. The actual cost for energy, the gas supply charges, are subject to regular adjustments to reflect the rise and fall of commodity markets.

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This story was updated to reflect the correct amount of the proposed $18.50 residential monthly customer charge.