Most Midstaters pay little attention, but there are two components to their electricity bills.
The first, called the supply charge, is based on the amount of electricity actually used.
The second, called the distribution charge, is from the utility. It is that portion of the bill that PPL is seeking to increase.
It’s referred to as the poles-and-wires side of the business. Maintaining and upgrading the infrastructure that keep your lights on isn’t cheap, and PPL hasn’t asked for a distribution increase in three years. If approved, it’s estimated to cost the average residential customer about $10 more per month.
“We’re sensitive to the fact that people don’t like to pay more for anything,” said PPL spokesman Paul Wirth. “But of course everything has gone up over the last three years and so have our costs.”
The lion’s share of PPL’s request is the $14.13 monthly customer charge that everybody pays regardless of usage. PPL wants to increase the customer charge to $20 a month. Overall, PPL hopes to capture an additional $167.5 million per year from its 1.4 million customers.
“We would use almost all of the money to continue to improve reliability for our customers,” Wirth said.
But PPL will have to fight to get all of what it wants.
“We filed a complaint on Monday against the rate increase,” said Tanya McCloskey, Pennsylvania’s acting Consumer Advocate.
The Public Utility Commission will ultimately decide if PPL can raise its rates and by how much. McCloskey thinks PPL’s ask is too aggressive and would most hurt the poor and elderly.
“On its face, the company has not fully justified the amount of the rate increase that they’ve requested,” McCloskey said. “The rates they’ve proposed would not be just and reasonable rates.”
Keeping wires working and houses lit on Main Street is easy for customers to understand. But keeping investors happy on Wall Street is also part of the deal. PPL has built a nearly 11 percent return for investors into its request. Customers, of course, would be paying that, too.
“So we need to provide them – investors – a rate of return and the rate of return is built into the increase,” Wirth said.
PPL intends to do $5 billion in upgrades over the next five years. Investors fund it and expect to be paid off.
But how much? That will be a contentious component of the coming public debate over PPL’s hike request, according to McCloskey.
“The company does have to attract capital to be able to make the infrastructure improvements,” McCloskey said. “But we believe they’ve overestimated the amount that they need.”
That could be part of PPL’s strategy. In 2013 it requested a $104 million rate hike and was granted, by the PUC, $71 million.
The process isn’t swift. PPL is hoping to have its increase in place by January 1, 2016. Public hearings and a final verdict from the PUC could take nine months.