Starting in the year 2015, customers of PPL Electric Utilities Corp. may be charged special fees for the utility’s storm-related expenses.
The Pennsylvania Public Utility Commission (PUC) granted the Allentown-based utility a storm damage expense rider, in addition of its standard rates. The ruling modified terms and conditions of the fee originally sought by PPL.
The new rate, which will allow PPL to charge customers for net annual storm damage costs exceeding $14.7 million, takes effect in January 2015, according to a PUC order issued Thursday.
PPL filed the proposal in March 2013, three months after the PUC directed the utility to seek a storm damage fee as it issued a ruling in a base-rate case.
The proposal generated opposition from consumer and business groups. The state Office of Consumer Advocate opposed the plan and argued for it to be considered with PPL’s next base-rate case.
“We thought that it was unsound ratemaking and bad policy,” Acting Consumer Advocate Tanya McCloskey said.
The issue created much confusion over what types of storms would be considered for coverage under the new tariff, she said.
“Storm expenses are a normal operating expense,” McCloskey said. “If you have riders like this, you are going to have a reduction in the company’s risk. If the risk is being shifted to ratepayers, we have to question the profit levels in their base ratemaking cases.”
The special fee would affect ratepayers only after large, damaging weather events, PPL spokesman Bryan Hay said.
“It is a fairer way to pay for and recover the actual costs,” he said. “This will help customers with reliability.”
The issue results from PPL’s decision several years ago to buy storm-damage coverage from an offshore affiliate, PPL Power Insurance Ltd., and bill customers for the premiums.
That practice drew fire in 2012 from the PUC’s Bureau of Investigation, which recommended the utility consider a rider to fund a reserve for storm costs. The bureau also recommended the PUC postpone the matter until PPL’s next base-rate case.
PPL told the PUC it needs the rider to recover from storm-linked damage between rate cases called for special fee to be adjusted based on annual weather-linked expenses.
Under the PUC order, the new levy would kick in once PPL’s expenses exceed the $14.7 million the utility already collects yearly for storm-related costs in its standard fees.
Among the costs PPL will seek to recover under the storm-damage rider will be expenses from Hurricane Sandy in 2012. PPL reported $81 million in restoration costs resulting from the hurricane in a filing with the U.S. Securities and Exchange Commission and disclosed plans to seek $28 million from ratepayers.
The PUC ruling says the utility’s expenses from Sandy will be considered under the new tariff over a three-year period because it was an extraordinary event.
The order prevents PPL from using the rider to recover capital expenses and limits the new fee to coverage of actual damages from the preceding year.
If PPL’s storm damage is less than $14.7 million annually, the difference will be refunded to customers, the PUC decreed.