PPL wants to bill customers for storm damage [The Morning Call (Allentown, Pa.)]

Oct. 19--After a string of expensive major storms, PPL Electric Utilities is looking to add another new line item to its customers' bills: a fee that would help it recoup its costs for future severe weather and expenses related to the $60 million blow dealt the company by Hurricane Sandy in 2012.

If approved, the storm damage expense rider would join the also-new distribution system improvement charge, which the state Public Utility Commission approved this spring and showed up on bills starting in July, to help the Allentown company pay for infrastructure improvements.

And it would make PPL -- already the first electricity provider to have a distribution system charge -- the first utility in Pennsylvania to have a specific line item on its bill to pay for storm recovery.

The storm recovery plan, which grew out of the administrative process in which regulators set PPL's 2013 rates, has drawn opposition from consumer and business groups involved in the PUC's rate-making process.

"Our concern is that it takes one item of expense and pulls it out of the rate-making formula, without regard to any other portion of expenses that may have gone up or down, and adjusts for that one item, and in our assessment that is single issue rate-making, which is unfair to ratepayers," said acting Consumer Advocate Tanya McCloskey.

The line item would adjust annually and only hit customers after major storms put PPL over the annual storm recovery allocation already provided for in its base rate, which is now $14.7 million. Customers' bills would be lower when damages fall short of that amount, said Dennis Urban, PPL's vice president of finance and regulatory affairs.

"It would be for costs of restoring power after a significant storm," PPL spokesman Bryan Hay said. "Costs associated with restoring power after a major storm can be staggering. They can often involve such things as feeding, lodging and paying hundreds of out-of-state utility workers and purchasing new equipment."

That may be, McCloskey said, but there are existing avenues for recovering the cost of major storms that allow them to be spread over several years and incorporated into a utility's base rate, a process that allows closer review of the expenses themselves.

"Any time you pull out an item of expense, it reduces that company's incentive to manage effectively and efficiently that expense," McCloskey said.

The rate proposal appeared on the PUC's agenda Thursday, but the board deferred action. PPL has requested a zero fee in the first year if the storm recovery charge, known as the storm damage expense rider, is approved.

It would be adjusted at the start of 2014 based on the storm expenses incurred by the utility in 2013.

Major storms in 2011 cost PPL $100 million and Sandy alone cost $60 million when it hit in 2012, the utility says in regulatory filings. But in 2009, storm damage costs only hit $10.9 million.

In a filing with the PUC, PPL says the new fee is an effort to better manage unpredictable and widely fluctuating storm costs.

"It is good from our perspective in that we get real-time cost recovery, but it is also good from the customers' perspective in that they pay no more or no less than our actual cost experience," Urban said.

In 2007, the utility tried buying storm damage insurance from its affiliate PPL Power Insurance and charging the premiums to ratepayers.

But in 2012 when PPL applied to continue the practice as part of the rate-setting process, the PUC's Bureau of Investigation and Enforcement objected, saying it had not been cost-effective. The bureau suggested creating a storm damage reserve account that would be replenished with a storm damage rider on customers' bills.

PPL then applied to the PUC for a storm damage rider linked directly to recent storm recovery costs.

The storm damage rider would speed the recovery of storm damage costs, but cover only operating, not capital costs, the utility says in its official filings. Under the current system, in which storm costs are deferred, complete cost recovery can take as long as seven years.

PPL's other new fee, the distribution system improvement charge, first appeared on bills in July at a rate of 0.47 percent of the total amount billed to customers, excluding the generation charge. PPL upped that charge to 1.06 percent in October to cover accelerated distribution system improvements.

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