PPL is seeking approval for new rate system

Intelligencer Journal

Published: Sep 03, 2008
01:39 EST

By PATRICK BURNS, Staff

PPL Electric Utilities customers' bills will increase slightly if the utility gets permission to change the way it calculates its transmission rates.

Last week, PPL asked the Federal Energy Regulatory Commission to approve a rate system based on a formula that would allow the company to invest more in its transmission system.

If the new rate system is approved, the utility would reap about $20 million in annual revenue, while the average PPL residential customer's rate would increase by 74 cents a month beginning Nov. 1.

David G. DeCampli, president of PPL Electric Utilities, said in written statement that the small increase will give PPL "the financial resources it needs to continue to provide safe and reliable transmission service."

"All of our customers benefit from a strong transmission system, and that's what this request is about," DeCampli said.

PPL's transmission rate, which represents about 7 percent of the total electric bill for an average residential customer, has not changed since 1998.

Transmission rates cover the company's costs to build, operate and maintain transmission facilities. Transmission lines move bulk electricity across the regional power system to local communities.

Under the formula system, a utility requests a specific profit level, which is subject to FERC review. Customers' bills would then be adjusted to reflect the approved profit level. The new transmission rates could then be adjusted annually with FERC approval.

Irwin A. "Sonny" Popowsky, Pennsylvania consumer advocate, said he supports the formula–based system, but said PPL's request of 12.84 percent on its overall return on equity is too high.

"We agree that the company needs to be fairly compensated to the extent that they build these transmission lines for the benefit of their customers. We just think think the profit level they're requesting is excessive," Popowsky said.

PPL is requesting a 14.09 percent return on its 500-kilovolt Susquehanna Roseland line, which is currently being built. The line will run north from Berwick, past Wilkes-Barre and Scranton, then east to Hawley and southeast to Bushkill, where it will cross the Delaware River to Roseland, N.J. Popowsky said he expects to file a protest with FERC in the next two weeks.

While the costs for some transmission lines are paid for entirely by PPL Electric Utilities customers, the costs of regional transmission line projects, such as the Susquehanna Roseland line, are shared among all customers in a 13-state region that includes Pennsylvania. Popowsky said several other electric utilities in the region also are seeking to switch to the formula system, which could raise PPL customers' rates even higher.

Local electric rates are expected to soar by an estimated 34.4 percent once caps on the cost of producing electricity expire at the end of 2009.

PPL last month asked the state for permission to buy power ahead of time, in four purchases per year, for use beginning in January 2011.

The company is using a similar approach to buy power for 2010, which dodges the hit of having to buy all its power at once and being at the mercy of whatever the open-market price is at that time.

Other utilities that faced rate-cap expirations have passed on rate hikes as high as 70 percent.

E-mail: pburns@lnpnews.com