In the wake of several closely-watched electric rate cases, Pennsylvania regulators have scheduled a hearing to address the efficacy and appropriateness of alternative ratemaking methodologies, including revenue decoupling. The Public Utility Commission’s hearing will allow participants to discuss:  (1) whether revenue decoupling or other similar rate mechanisms encourage energy utilities to better implement energy efficiency and conservation programs; (2) whether such rate mechanisms are just and reasonable and in the public interest; and (3) whether the benefits of implementing such rate mechanisms outweigh any costs associated with implementation.

The PUC has identified a lengthy list of issues concerning alternative ratemaking mechanisms, which are intended to guide the discussion. Those issues include:

• Alignment of alternative rate mechanisms with the energy utilities’ implementation of energy efficiency and conservation programs;
• The statutory and regulatory barriers, if any, associated with alternative rate mechanisms in Pennsylvania;
• Whether the benefits of alternative rate mechanisms exceed any costs associated with implementing the rate mechanisms;
• Whether there is an optimal rate mechanism for encouraging energy efficiency and conservation programs;
• Whether there is an optimal alternative rate mechanism for encouraging more efficient system operations;
• Identification of best practices in other jurisdictions;
• Identification of any risk of interclass or intraclass cost shifts, including low income community cost impacts, and whether those cost shifts are inappropriate;
• Whether alternative rate mechanisms increase customer bill volatility;
• Imposition of conditions by other state regulatory commissions as a result of implementation of novel rate designs;
• Impacts alternative rate mechanisms may have on incentives for customers to participate in energy efficiency and conservation programs; and
• Whether there is a need for a fixed rate element, and whether those fixed rate elements should be customer based, demand based, or time-of-use based.

The PUC will select participants to present testimony and address these issues. The hearing, which is public, will be held March 3.

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