Pa. gives PGW 30 days to report findings on weather normalization debacle

Pennsylvania on Thursday gave Philadelphia Gas Works 30 days to report the findings of an internal investigation on last month’s weather normalization fiasco, which resulted in excessive charges applied to thousands of monthly bills of Philadelphia natural gas customers.

The Pennsylvania Public Utility Commission formally ratified an emergency order enabling PGW to eliminate the weather normalization adjustment (WNA) clause in its tariff for May 2022. This effectively reverses the WNA charges on consumer bills for May usage, resulting in refunds of about $12.4 million. PGW says the refunds will appear as bill credits on July and August gas bills.

After PGW files its report with the commission, the public will have 20 days to file comments.

» READ MORE: The weather was warm in May. So why did many Philly gas customers get hit with ‘outrageous’ heating bills?

The city-owned gas utility petitioned the PUC last month to allow it to issue the refunds after customers received bills that were triple, quadruple or even quintuple the size of their bills from last year.

While most of PGW’s 520,000 customers got weather normalization charges in May, only some received excessive bills. Some commercial customers got hit with charges of about $500. All weather normalization charges from May will be refunded, no matter how small. If any customers received credits, PGW will not attempt to recover them, the PUC said.

The WNA is a tool that stabilizes PGW’s revenue by allowing PGW to adjust its bills up or down between October and May when the actual weather departs significantly from the average weather patterns during the previous 20 years. Average weather is measured in “heating degree days,” a metric that measures how much energy is required to heat a house to 65 degrees.

PGW said the warm weather in May was responsible for the charge. The company, which initially did not acknowledge the magnitude of the problem, said in its PUC filing that a “significant anomaly” occurred in the application of the weather charge in May that “produced unusually large and unanticipated charges” to many customers.

May’s weather was the sixth warmest May in the last 12 years, according to heating degree days measured by the National Weather Service data at Philadelphia International Airport, the location used for calculating PGW’s weather normalization adjustment.

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.

Where May 2022 differed from previous years was that there were zero heating degree days recorded after May 11, which PGW says affected customers whose billing cycles began around that time. The impact of zero actual heating degree days in PGW’s formula is likely to be the focus of PGW’s investigation.

One way PGW may revise its formula in the future is to reduce the number of months when the weather normalization adjustment applies. Columbia Gas of Pennsylvania, the only other PUC-regulated utility that is permitted to assess a WNA, applies its charge only from November to May. PGW’s applies its adjustment from October to May.

The formula used to calculate the weather charges is spelled out in PGW’s tariff, the formal document that details how gas rates are assessed.