Exelon’s (NYSE:EXC) PECO on March 29 said that it is seeking Pennsylvania Public Utility Commission approval of an increase in the rates charged to customers for the delivery of electricity.
Based on the company’s $82m rate request, overall energy delivery rates would increase about 2.2% over current rates, beginning Jan. 1, 2019, PECO said, adding that the total monthly bill for a typical residential electric customer using about 700 kWh of electricity would increase by about $3.28, or 3.2%.
The company noted that the new electric delivery rate would provide funding for enhancements to PECO’s electric distribution system and services, including infrastructure and technology upgrades that would:
- Help PECO maintain its safety and service reliability by strengthening the system against weather and other hazards
- Support innovative online and mobile tools that make it easier for customers to manage energy use, pay bills, use customer-generated energy sources and more
- Encourage economic development and environmental stewardship in the company’s service territory
PECO said that the March 29 filing also includes its proposed plan to provide annual tax savings to more than 1.6 million customers in southeastern Pennsylvania.
The tax savings result from federal income tax reductions under the 2017 Tax Cuts and Jobs Act, PECO said, adding that it is seeking commission approval to pass the full benefit of the Act onto customers, including an estimated $68m for 2018, that would offset the proposed rate increase.
Based on the rate increase alone, bills for a typical small business customer would increase by about $11.06 per month – about 1.3% – and monthly bills for a typical large business customer would increase by about $168.99 – about 1%. However, PECO added, those bill increases could be largely offset by the 2018 tax savings that will be passed onto customers.
According to the filing with the commission, PECO last filed for an increase in electric base rates in March 2015, and since rates were established in that case, the company has continued to make substantial investments in new and replacement utility plant to ensure that customers can continue to receive safe and reliable service. Between Jan. 1, 2016, and Dec. 31, 2019, the end of the fully projected future test year, PECO said that it will have invested more than $1.9bn in additional electric distribution plant.
Load growth from 2016 to 2017 has declined by 0.5%, notwithstanding the fact that the number of customers has increased by 0.8% during the same period, the company said. Load growth from 2017 to 2019 is expected to remain relatively flat with a compound annual growth rate of 0.1%, notwithstanding customer growth of 0.8%.
Absent rate relief, PECO added, the company’s overall rate of return at present rates is projected to be only 5.84% for the fully projected future test year. Also, the indicated return on common equity under present rates is anticipated to be only 7.30%, which is inadequate by any reasonable standard and far less than required to provide the company with a reasonable opportunity to attract capital, PECO said.
The requested rates would produce a 7.79% return on the company’s claimed measures of value and a return on its common equity of 10.95%, PECo said.
Among other things, the company said that without the requested rate relief, PECO’s financial results would deteriorate even further in 2020 and thereafter, jeopardizing the company’s ability to appropriately invest in the infrastructure needed to maintain and improve its safety, reliability, and customer-service levels.