Utility, Environmental & Energy Alert
The Pennsylvania Public Utility Commission (Commission) currently has a detailed regulation, 52 Pa. Code § 53.53, describing the information that must be submitted to the Commission to support a proposed general rate increase. A utility currently submits data pertaining to its historic test year (the test year chosen by the utility to support its filing) and its future test year (the adjusted historic test year for known and measurable changes 12 months beyond the book figures for the base test year). Section 53.53 currently contains Exhibits A through D, establishing different data requirements for different utility industries.
Act 11 of 2012, however, allowed utilities to use a Fully Projected Future Test Year (FPFTY) in general rate cases. An FPFTY allows a utility to project revenue requirements and ratemaking components throughout the 12-month period beginning with the first month that the new rates would be placed in effect, after the expiration of the full nine-month suspension period allowed by law. The use of an FPFTY is voluntary; a public utility may continue to use a historic test year to establish rates. Several public utilities have already availed themselves of an FPFTY but the Commission has yet to implement regulations regarding the specific procedures to be used and information to be submitted in support of an FPFTY.
On December 21, 2017, the Commission adopted an order proposing procedures and filing requirements for an FPFTY. The proposal would add a new Exhibit E to Section 53.53, which sets forth the information that must be submitted to the Commission when a utility uses an FPFTY. This information includes the following categories: summary of filing, description of utility operations, rate base, rate of return, balance sheet, income statement and statement of cash flows, operating revenues, operating expenses, employee costs (including related costs, such as benefits and retiree costs), depreciation, taxes, long-term infrastructure improvement plan, and annual asset optimization plan. Most of the requirements would apply to all utilities, but some requirements would be specific to utilities in particular industries. The Commission is not proposing any changes to the existing Exhibits A – D, but is proposing several updates and other modest changes in the text of Section 53.53 itself.
The Commission is asking stakeholders to comment on its proposal. It has identified certain issues in which it is particularly interested in receiving comments. For example, the Commission specifically invited comment on the applicability of FPFTY regulations to municipal entities subject to Commission regulation. In addition, the Commission has offered interested parties the opportunity to suggest additional changes to Section 53.53, including changes to Exhibits A-D.
The Commission’s order will be published in the Pennsylvania Bulletin and comments will be due to the Commission within 45 days of the date the order is published. The Commission will then convene at least one stakeholder meeting to review the comments. Subsequently, Commission staff will revise the proposal and submit it to the Commission, which will initiate a proposed rulemaking. Interested parties will have the opportunity to submit comments and reply comments regarding that proposal. Final form regulations probably would not be adopted for a year or more.
Utilities that are interested in using an FPFTY in future rate proceedings are urged to review the Commission’s proposal, submit comments, and possibly even participate in the stakeholder meeting.