Regulators want judge to examine Peco's rate hike request

State regulators are seeking a special inquiry into a new Peco Energy Co. rate proposal that would affect commercial customers who produce some of their own power.

The Pennsylvania Public Utility Commission on Thursday voted to investigate Peco's $190 million electric rate filing, a routine action that guarantees the proposal will be assigned to an administrative law judge for hearings and undergo scrutiny for up to seven months.

In a joint statement, Chairman Robert F. Powelson and Commissioner Gladys M. Brown raised specific questions about Peco's proposal to replace the Auxiliary Service Rider in its existing rates with a new Capacity Reservation Rider.

Those provisions govern the way Peco charges commercial customers who can produce some of their own electricity, using sources such as backup power systems, gas-fired combined heat-power generators, or solar panels.

The proposal gets to the heart of an emerging struggle in the utility industry, which needs to recover costs for its distribution system even as a growing number of customers draw less power from the grid.

Peco says the old rate structure is outdated. The new rider would "help ensure that all customers - regardless of the source of their electricity - share financial responsibility for maintaining the safe and reliable distribution system that benefits them," said Cathy Engel Menendez, Peco's spokeswoman.

Powelson and Brown, in their statement, said they recognize that customers should pay a fair share of the cost of grid access. "However, we also believe it is important to weigh any potential adverse effects the proposal may have on the economics of distributed generation investments," they said.

Peco's $190 million proposal, filed March 27, would increase revenue from distribution rates by 15.6 percent. That translates into about a 6 percent increase in the typical monthly residential bill, since most of a customer's bill pays for generation costs, which fluctuate quarterly, according to market conditions.

For residential customers, much of Peco's proposed boost would come from a 68 percent increase in the fixed monthly customer charge, from $7.13 to $12. All customers would pay the increase, regardless of how much power they consume.