Pa.’s utility commission to review data centers’, utility profits’ impact on rates

The Pennsylvania Public Utility Commission (PUC) unanimously approved two measures this month to address the increasing affordability crisis stemming from rising utility rates. PUC Chairman Steve DeFrank highlighted rapidly changing conditions, including high inflation, supply chain constraints, and data center development, as contributing factors to increased electricity, water, sewage, and gas bills, leading to an "extraordinary increase" in proposed rate hikes.

One key measure introduced by DeFrank will establish a Ratemaking Working Group. This group is tasked with scrutinizing how the current system allows utilities to incorporate profits into customer rate increases, examining methods for calculating and raising rates outside of formal ratemaking cases, and enhancing transparency in these processes. This initiative directly responds to Governor Josh Shapiro's January budget address, where he urged the commission to ensure utility spending is justified and customer dollars are well spent.

Investor-owned utilities primarily generate profits from infrastructure upgrades, rather than the supply of gas and electricity. While some upgrades are crucial for safety or regulatory compliance, critics argue that recent PUC-approved rate increases have led to "double-digit profits" for utilities, exceeding their cost of capital. Concerns were also raised about "black box" settlements in ratemaking cases, which lack transparency, and distribution system improvement charges that can increase rates outside of standard cases. PUC Vice Chair Kimberly Barrow emphasized the need for a critical review of the underlying framework for setting rates, citing data suggesting regulators have authorized returns on equity that may exceed utilities' cost of capital, potentially overcharging consumers.