Pa. approves refund of excessive weather charges for Philly gas customers
The Pennsylvania Public Utility Commission approved PGW's emergency request to give back $12.4 million of excessive weather normalization charges in June bills.
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Pennsylvania regulators on Friday approved a plan by Philadelphia Gas Works to refund $12.4 million in excessive weather normalization charges for June gas bills, a day after PGW filed the emergency request to give the money back to customers.
Gladys Brown Dutrieuille, chair of the Pennsylvania Public Utility Commission, signed off on the emergency order late Friday, allowing the city-owned gas utility to begin programming its billing system to include the refund in July and August bills. PGW customers will see the refund as a credit on their bills.
PGW on Thursday announced it would reverse the onerous weather normalization adjustment charges (WNA) for May natural gas usage that caused some customer bills to balloon by hundreds of dollars this month, and triggered widespread blowback from outraged customers.
» READ MORE: PGW will refund about $12.4 million to customers hit with ‘weather normalization’ charges
PGW said it experienced a “significant anomaly” in the way its system calculates the weather normalization adjustment for many customers, a billing algorithm that allows the utility company to increase or lower bills if the weather during the billing period diverged significantly from normal. The weather in late May was very warm, causing PGW to tack on a charge to adjust bills upward.
About 270,000 customers whose billing cycles started in mid-May were most seriously affected, PGW says. Any customer who was billed a WNA charge for May usage, even a small one, will receive a refund.
Typically the weather adjustment results in relatively small customer charges or credits. But many customers received bills in recent weeks with WNAs that were larger than their entire bills during the coldest months in winter.
» READ MORE: The weather was warm in May. So why did many Philly gas customers get hit with ‘outrageous’ heating bills in June?
The reversal will result in about $12.4 million in customer refunds, the company said in its emergency filing Thursday with the PUC, which oversees PGW. In a footnote, the company said the magnitude of the impact on customers is an estimate, “and is likely understated.”
The refund of $12.4 million is unlikely to harm PGW financially. The company earned $220 million in net income in 2021-22, up 42% from the previous year, according to an unaudited income statement for the fiscal year ending May 31 that was included in its PUC petition.
PGW was required to seek the PUC’s permission to issue the refunds because it says the charges were imposed according to a formula approved by the commission and included in its 157-page tariff, the formal document that details how gas rates are assessed.
“I believe that issuance of an emergency order is appropriate under the unique circumstances,” Dutrieuille said in the order. The full commission will vote on the emergency order at its July 14 meeting.
The WNA is an important financial tool for a nonprofit municipal utility such as PGW, allowing it to stabilize the utility’s cash flow even when the weather is unusually warm.
The complicated formula that PGW uses to calculate the weather normalization adjustment generates a unique amount for each customer that changes with each billing cycle, depending upon PGW’s calculation of each customer’s expected heating usage and how much the weather deviated from normal during the billing cycle. Billing cycles are staggered based on the most recent meter readings.
The refund approved Friday resolves the immediate problem facing PGW and its customers. But the company will need to return to the PUC to revise its weather normalization adjustment in its rate tariff before it can resume using the charge, since the current formula seems to be flawed.
“The WNA formula contained in PGW’s tariff can no longer be deemed to produce just and reasonable rates,” Aron J. Beatty, an attorney with the Pennsylvania Office of Consumer Advocate, said in a filing Friday. “Further, the WNA formula has produced unreasonably discriminatory results among residential customers, as those on certain billing cycles were unaffected by its operation while others experienced significant harm.”
The Philadelphia Inquirer is one of more than 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push toward economic justice. See all of our reporting at brokeinphilly.org.