Peco files for $190M electric-rate increase

Peco filed a $190 million electric-rate increase request Friday, its first in five years, which it says would increase a residential customer's bill 6 percent.

The Philadelphia utility, which serves 1.6 million customers in the city and surrounding counties, characterized the rate increase and a companion filing outlining its five-year infrastructure-improvement plan as vital customer investments in the power system.

"These investments are needed to ensure we can continue to keep the lights on for our customers and provide the safe, reliable service they deserve," Craig Adams, Peco's president and chief executive, said in a statement.

If approved by the Pennsylvania Public Utility Commission, the increase would boost the total monthly bill for a residential customer using 700 kilowatt hours of electricity about $6.55 a month, or about 6 percent. The increase would go into effect Jan. 1.

Bills for all customers would go up about 4.4 percent. A typical small-business customer would pay about $27.72 more per month, and a typical large customer would pay $847.57 a month, Peco said.

The increase would affect only the distribution portion of the Peco bill, which pays for the wires, meters, customer service, and billing systems. The generation charge, which pays for the electricity itself, is a pass-through cost that varies quarterly.

About 34 percent of Peco customers buy their power from third-party suppliers rather than the utility itself. Regardless of who supplies their power, all customers pay Peco's distribution charges to get the electricity delivered through Peco's system.

Rate increases are typically opposed by advocates for residential, commercial, and industrial customers, prompting a months-long investigation by the PUC's staff into a utility's justification for more revenue. The adversaries often negotiate a settlement, then submitted to the PUC for approval.

Such was the case in Peco's last electric-rate increase request in 2010. Peco asked for a $316.4 million increase and settled for $225 million, effective in 2011.

Despite that increase in the distribution charge, Peco customers actually pay less now than they did in 2011. Generation costs have declined with the huge growth of hydraulically fractured natural gas, which is burned to produce electricity.

On Jan. 1, Peco customers were paying a total cost of 16.15 cents per kilowatt hour, down 2.3 percent from the same date in 2011. Adjusted for inflation, this year's rate is 8 percent less than customers paid four years ago.

While electricity rates are low, some utilities, such as New Jersey's Public Service Electric & Gas Co., have taken the opportunity to advance major infrastructure-improvement plans. The higher distribution costs are offset by lower generation costs.

In a separate filing, Peco submitted an infrastructure plan it calls System 2020, which calls for $275 million in spending during the next five years to install advanced equipment and reinforce the distribution system to make it more weather-resistant and less vulnerable to storm damage.

The cost of those improvements, if approved, is not included in the rate-increase request. Those costs would be submitted later and billed to customers through a surcharge called a distribution-system-improvement charge.