Dive Brief:

• The Pennsylvania Public Utility Commission (PUC) on Thursday took another step toward the development of innovative electricity rates and the implementation of Act 58, which lawmakers approved last year in an effort to modernize utility tariffs in support of emerging technologies.
• The commission adopted a Distribution Rates Policy Statement that enumerates factors to be considered when utilities propose alternative ratemaking mechanisms and rate designs in distribution base rate proceedings.
• The statement is still being finalized but includes discussion of how the ratemaking mechanism and rate design will support improvements in utility reliability.

Dive Insight:

There are a host of new technologies pushing the need for updated ratemaking principles, according to Pennsylvania regulators. Along with rooftop solar, gas microturbines, combined heat and power projects and the consolidation of the water and wastewater industries are all impacted.

"There are considerable shifts in the rate-setting environments for electric, natural gas, and water utilities," PUC Chairman Brown Dutrieuille wrote in a motion to modify and adopt the new Distribution Rates Policy Statement.

The commission approved the motion unanimously, to establish PUC guidelines for "fixed utilities and interested stakeholders" on what factors to consider when investigating alternative ratemaking methodologies.

The commission's ratemaking efforts are a part of broader utility modernization efforts in the state. Last year, the PUC launched the proceeding to consider broad changes to distribution rate structures, alongside an ongoing study of utility billing practices and the development of new rules governing third party electric vehicle charging.

"I continue to be interested in proposals that remove barriers and provide incentives to utilize energy efficiently, encourage development of cost-effective distributed energy resources, and encourage more efficient use of our energy distribution infrastructure," PUC Commissioner Andrew Place said in a statement following the 5-0 vote.

Act 58, which Pennsylvania Gov. Tom Wolf signed last year, gave the PUC statutory authority to approve alternative rate mechanisms for electric, natural gas, and water or wastewater utilities. That could include performance-based incentives, various levels of decoupling, and variations of demand-based and time-of-use pricing options, such as critical peak pricing.