FOR IMMEDIATE RELEASE
State Rep. Phyllis Mundy
Pending legislation would hurt consumers, benefit utility companies
The tragic natural gas explosion in Allentown truly brought home the need to improve utility infrastructure in order to provide safe and reliable service for utility customers. We in the General Assembly must do what we can to make that happen. However, state Rep. Robert Godshall’s House Bill 1294, to be considered by the full House of Representatives as soon as Tuesday, June 14, is not the answer for consumers. It is, on the other hand, a huge windfall for natural gas, electric, and wastewater utility companies.
Here is an analogy to illustrate how H.B. 1294 would impact consumers. Imagine watching your local school board vote on a plan to raise property taxes. The school board president makes his case for the increase by saying the school district hired four new teachers this year and that a property tax increase would allow the district to pay their salaries. However, a discerning resident rises and asks, “Wait a minute, didn’t five teachers retire this year? Won’t those savings more than pay the new salaries?”
To increase property taxes to pay for four new teachers when five other teachers retired would be irrational, irresponsible, and plain infuriating for the taxpayers footing the bill. However, H.B. 1294 would allow utility companies to use this very same approach in determining utility costs for ratepayers.
Under H.B. 1294, the Public Utility Commission (PUC) would be able to approve requests of natural gas, electric, and wastewater utility companies to automatically increase their customer rates without having to prove that these increases are needed and without public input. This goes far beyond the fundamental concepts embodied in current ratemaking requirements that have protected consumers for decades.
Currently, these utilities must prove to the PUC in a base rate case that they need to increase rates on an overall basis – that increased costs to update or expand their infrastructure outweigh any cost reductions or revenue increases. That is why most utilities receive much less than the amount they originally request – because the PUC determines during the case that the utility requested more of an increase than it actually needs. House Bill 1294 would remove this check and balance.
It is critical to note that many utilities have gone 10 to 20 years without a single base rate increase. Take PECO Gas, for example. PECO went 20 years without increasing its delivery or service charges while significantly upgrading and expanding its delivery system. According to PECO, its rates remain among the lowest in Pennsylvania by saving customers money through the use of new technologies and through increasing sales, operational mergers, and other efficiencies.
This is how utility ratemaking is supposed to work. While needed infrastructure improvements may increase certain costs, the addition of new customers, tax breaks, lower interest rates, new technology and other efficiencies provide more revenue and reduce other costs.
Consumer Advocate Sonny Popowsky stated in his testimony on H.B. 1294 that, “The sweep of this provision is extraordinary in its scope and its potential impact on Pennsylvania utility consumers.” I could not agree more.
I certainly recognize the need to improve utility infrastructure in Pennsylvania. But H.B. 1294 is the wrong answer for consumers. That’s why I will offer an amendment to this bill that would only allow these companies to raise rates high enough to recover the overall (net) increase in their costs. This would permit them to make necessary improvements without raising rates beyond what is needed to fund those improvements. I urge you to contact your state representative before the fast-approaching vote on this bill and ask him or her to support my amendment on your behalf – and, if the amendment fails, to vote against this anti-consumer bill. You can’t afford not to.
State Rep. Phyllis Mundy serves as Democratic chairman of the House Finance Committee. She represents the 120th Legislative District in Luzerne County.