The PUC giveth and the PUC can taketh away.
Following a hefty, and welcome, rate reduction last December that cut natural gas prices for residential customers of UGI Utilities Inc. by 20%, the utility announced last week it will increase rates in June and December, provided the state Public Utility Commission approves.
Last year’s decrease set the average monthly cost of gas at $93.17 for consumers across UGI’s territory in Northeast Pennsylvania. By next December, if the PUC fully adopts UGI’s request, the average monthly cost will reach $101.99. Monthly bills will still be roughly $15 smaller than they were before last year’s deep cuts. But if history is any guide, they will likely move up in coming years.
Energy markets are volatile and utilities are required to pass the cost of the natural gas they purchase directly on to consumers without any markup. But the actual cost of the gas, known as the commodity charge, only represents about 54% of each monthly bill, according to UGI. The rest comes from distribution and customer charges, which are also regulated by the PUC.
The current rate-setting system offers a substantial degree of financial certainty for UGI, which had an adjusted net income of more than $600 million in 2023, but offers little stability for consumers, including commercial customers who will see their rates increase from 9 to 10% by the end of this year if the PUC grants UGI’s request. Furthermore, the frequent swings in utility rates complicate matters for consumers trying to save money by choosing alternate suppliers, some with fixed rates and terms, through the PA Gas Switch program.
To add insult to injury, UGI’s gas customers are also subject to a “weather normalization adjustment” that applies to distribution charges from October through May. If temperatures in any given month are 3% warmer than the 15-year average for that month, customers pay a surcharge, which averages about $4 to $5 for residential customers, according to UGI. A credit is applied if temperatures are 3% colder than the 15-year average.
UGI argues the adjustment is “revenue neutral,” but, given warmer temperatures due to climate change, it seems stacked against the consumer. The surcharge, instituted under a five-year pilot program approved by the PUC, will be reviewed in 2027.
With consumers facing price pressures for everything from food to clothing to housing, the PUC should closely review UGI’s calculations of future gas prices and reduce or hold the line on the requested rate increase if possible.
In the long term, state leaders should review how utility rates are currently formulated and consider reforming the process so that the PUC can succeed in its stated mission “to balance the needs of consumers and utilities; ensure safe and reliable utility service at reasonable rates; protect the public interest; educate consumers to make independent and informed utility choices; further economic development; and foster new technologies and competitive markets in an environmentally sound manner.”
— Scranton Times-Tribune via AP
