State will investigate PGW’s rates after summer ‘weather normalization’ debacle

Philadelphia Gas Works will not be allowed to immediately implement a cap on its weather normalization adjustment, which caused thousands of heating customers to get massive bills after an abnormally warm May.

The Pennsylvania Public Utility Commission (PUC) voted 3-0 on Thursday to order a full investigation and analysis of the changes requested by PGW to the weather normalization adjustment, which automatically raises or lowers customer bills when the actual weather varies from “normal” temperatures. As part of the investigation, the PUC also called for broader consideration of PGW’s existing rates, rules, and regulations, extending the inquiry beyond weather normalization.

PGW this summer refunded about $12.4 million to customers after some residential customers in June got bills in excess of $200 for May usage, including weather charges that were more than five times their monthly delivery charges. Some commercial customers got hit with charges of about $500.

» READ MORE: Why did many Philly gas customers get hit with ‘outrageous’ heating bills?

The city-owned utility in August asked the PUC to approve a revised tariff that would cap its monthly weather adjustment to prevent the excessive charges in the future. PGW proposed limiting the weather adjustment to no more than 25% of a customer’s monthly delivery charges, which would effectively limit the weather charge to a fraction of the total bill.

The Pennsylvania Office of Consumer Advocate objected to the quick implementation of the change, saying that PGW did not provide evidence about how it determined that a 25% cap was the appropriate level of protection for customers.

In its order Thursday, the PUC said the utility’s proposal may result in changes that were “unlawful, unjust, unreasonable, and contrary to the public interest” and suspended the company’s request until April 1 to allow for an investigation by an administrative law judge.

Thursday’s action leaves PGW’s original weather normalization adjustment in place, at least for now.

The weather normalization adjustment, which has been in place for 20 years, allows the gas company to stabilize its finances by adding or crediting dollars to consumer bills when the weather diverges from historical averages. When it’s warm, as it was in May, it allows PGW to boost customer bills to generate more revenue. PGW is one of only two Pennsylvania gas utilities that has a weather charge.

In a report posted in August on the PUC’s website, PGW said the excessive charges were the result of “unprecedented” warm weather patterns in May, and not a problem with the underlying formula it uses to calculate the charge for each customer.

PGW, as a nonprofit municipal utility, said the weather charge is “essential to PGW’s fiscal health” and wanted to keep the mechanism in effect.