Cawley Asks Utilities to Use Quarterly Reconciliations for Bypassable Transmission Charges

Pennsylvania PUC Commissioner James Cawley has requested that Pennsylvania electric distribution companies reconcile transmission rates, which are a bypassable component of the price to compare, on an quarterly basis rather than on an annual basis.

This recommendation is notable because the PUC recently directed EDCs to consider transitioning from quarterly to semi-annual reconciliations for base generation rates (the PUC voted on a final order on this issue yesterday, but an order was not published prior to publication time indicating how the Commission ruled on this issue).

Cawley noted that, at PECO, even though transmission costs are projected to decrease in 2012, PECO's annual filing to set the TSC-1 transmission rate for residential customers requires an increase in the transmission charge, due to a prior under-recovery.

"Similarly, the proposed TSC-2 rate of $2.57 per kW represents an increase of $0.75 per kW when compared to the rate of $1.82 per kW that became effective January 1, 2011. This represents a 41.2% increase in the TSC-2 rate applicable to small commercial and industrial customers, and resulted from a 10% under-recovery of transmission costs, based on an approximate $5.1 million under-recovery, including interest," Cawley added.

"These two examples illustrate potential problems associated with annually adjusted rates. If quarterly TSC rate changes were incorporated, such under-recoveries could likely have been more effectively avoided, and associated interest charges could have been minimized to customers," Cawley said.

"In future Default Service Plans, I encourage EDCs to address under and over recoveries more concurrently, rather than allowing large imbalances to accrue under annual rate changes and annual reconciliations. The Commission has given EDCs the tools to adjust rates appropriately and timely. They should closely monitor revenues and costs, and effectively use quarterly price and reconciliation adjustment tools," Cawley said