Pennsylvania Utility Agrees To Increased Hedging For Default Service Supplies, Would Also Reduce Interest Applied To Previously Deferred Supply Costs

In a settlement with the Bureau of Investigation and Enforcement (I&E) of the Pennsylvania PUC and the Office of Consumer Advocate, UGI Utilities, Inc. - Gas Division has agreed to increase its hedging of natural gas supplies procured to serve default service customers

The settlement addresses UGI's annual 1307(f) purchased gas cost (PGC) proceeding at the Pennsylvania PUC, and remains subject to PUC approval

Specifically, UGI would implement several hedging recommendations from a portfolio optimization study conducted by a consultant

Under the settlement, for the Winter 2027-2028 hedge planning cycle, UGI Gas would work with its existing hedging manager to establish an increased hedging volume target and to extend the hedge purchasing window to a two-year horizon.

Additionally, UGI Gas would evaluate opportunities to incorporate additional storage capacity into its supply portfolio on an ongoing basis, and would include an economic analysis of any added storage contract(s) in UGI's next annual PGC filing following contract execution.

Finally, UGI Gas would explore analytical tools to modernize UGI's planning and forecasting practices and would present recommendations in its 2027 PGC proceeding.

In a statement filed with the PUC in support of the settlement, UGI stated, "These [hedging] modifications to the Company’s practices are expected to provide long-term cost benefits and are intended to reduce volatility over time to UGI Gas customers".

Additionally, the settlement would also significantly reduce the interest applied to previously deferred default service supply costs

Specifically, UGI Gas agrees to reduce the interest applied to the E-Factor (reconciliation balance) resulting from the rate cap imposed on UGI's quarterly supply adjustment earlier this year, versus the rate which would have resulted under the normal calculation, as discussed further in our prior story here

The interest associated with the rate cap reconciliation (under-collection) would be reduced by about $1.15 million under the settlement

During the proceeding, I&E had said that, absent a reduction in interest, the interest charges associated with the rate cap would have been over $1.6 million (meaning the settlement results in only about $500,000 of interest being assigned to the E-factor).

Docket R-2026-3062192