Pa. Governor Approves Bills Ending Migration Rider, Allowing Nonbypassable Surcharge

Pennsylvania Governor Tom Wolf has approved HB 57, which terminates the use of the migration rider in the natural gas market, and allows imposition of a nonbypassable surcharge for recovery of gas cost reconciliations if they exceed a certain threshold.

HB 57 ends the use of the migration rider, which had charged/credited prior period gas cost reconciliations to customers regardless of their current shopping status. For example, customers migrating to choice service would still be charged/credited prior gas cost reconciliations after leaving default service for a certain period of time, while customers newly returning to default service would bypass any such reconciliations related to the time they were on choice service. Such treatment has made apple-to-apple comparisons of gas supply costs difficult.

While HB 57 eliminates the natural gas migration rider, the enacted bill does allow the use a nonbypassable surcharge to recover gas costs if a natural gas distribution company's actual natural gas costs exceed the revenues collected by more than 10% in the previous 12-month period provided, "due to customers switching from sales service to transportation service." LDCs will be required to seek PUC approval for any such nonbypassable surcharge

HB 57 also aligns the interest rate charged to gas cost under- and over-collections to remove what its author, Rep. John Payne, said was an incentive for the under-collection of purchased gas costs, thereby increasing the dollar amount of quarterly reconciliations

Prior to HB 57, the law provided that "the legal rate of interest plus two-percent" applied to refunds to customers for over-collection of gas costs, and that recovery for under-collection included "the legal rate of interest." Payne, in a legislative memo, had noted that the term "legal rate of interest" is subjective, and that this asymmetrical interest rate structure, "arguably provides an incentive for the under-collection of purchased gas costs, thereby increasing the dollar amount of quarterly reconciliations."

HB 57, "eliminate[s] a confusing and asymmetrical interest rate structure, incentivize[s] accurate rate projections to minimize over and under collections and make it easier for customers to make an 'apples to apples' comparison between the gas supply rates offered by a natural gas distribution company and competitive suppliers," Payne said in the memo.

Specifically, HB 57 requires that both gas cost refunds to customers shall be made with, and recoveries from customers shall include, interest at the prime rate for commercial borrowing in effect 60 days prior to the applicable tariff filing and as reported in a publicly available source identified by the PUC or at an interest rate which may be established by the PUC by regulation

HB 57, as Act No. 47, shall take effect in 60 days.