Pennsylvania Public Utility Commission Budget Hearing

Detailed Outline Summary

I. Opening of the Hearing

A. Budget Framing and Hearing Context

• The committee opened the hearing by outlining the budget context for the Pennsylvania Public Utility Commission (PUC).
• The PUC’s proposed state share was identified as $98.102 million.
• This reflects an increase of approximately 2.18% over the prior year.
• The commission explained that the increase is driven primarily by:
  • Contractual salary obligations
  • Employee benefit increases
  • Current program load and operational needs
• The agency emphasized that it is not funded through the State General Fund, but rather through assessments on regulated utilities and entities.

II. Affordability and Consumer Assistance

A. Utility Affordability Concerns

• Representative Curry and other members raised concerns about affordability for utility customers.
• The discussion referenced a record number of approximately 415,000 household utility terminations.

B. Commission Response on Affordability Trends

• Commissioners noted that affordability problems are growing across a wider range of customers, not just among historically vulnerable households.
• The commission emphasized that affordability concerns now affect a broader socioeconomic spectrum of Pennsylvanians.

C. Customer Assistance Programs (CAPs) and LIHEAP Matching

The commission described several strategies to improve targeting of consumer assistance:

• Increasing participation in Customer Assistance Programs (CAPs)
• Improving coordination between utilities and assistance providers
• Expanding data-sharing efforts so utilities can identify customers likely eligible for:
  • LIHEAP
  • Other utility assistance programs

D. Data-Sharing Improvements

• The PUC explained that utilities are beginning to share common customer information using 12–15 standard application data points.
• The goal is to better identify households eligible for aid and match available assistance dollars to customers who qualify.
• Commissioners stressed that improving this data-sharing should make consumer assistance more efficient and equitable.

III. Small Business Affordability and Rate Design

A. Concerns Raised by Legislators

• Representative Kale and others asked about the impact of utility rate increases on small businesses.
• The committee referenced an estimated 1.1 million small businesses in Pennsylvania and the need to avoid imposing disproportionate costs on them.

B. Commission Explanation of Rate Case Process

The commission described the two-stage process used in rate cases:

1. Determining Revenue Requirement

• First, the PUC determines how much total revenue the utility needs to recover.

2. Allocating Costs Across Rate Classes

• Then, that revenue is allocated among different customer classes, including residential, commercial, industrial, and small business customers.

C. Role of the Small Business Advocate

• The commission emphasized the statutory role of the Small Business Advocate in representing small business customers.
• The advocate may:
  • Negotiate settlements
  • Sign settlement agreements
  • Litigate matters if settlements are not appropriate

D. Ongoing Issues

• Members referenced previous discussions in the House Energy Committee regarding metering costs and class-specific cost burdens.
• The commission stated it remains engaged with the Small Business Advocate on these issues.

IV. General Energy Policy and the PUC’s Regulatory Scope

A. Questions About Carbon Pricing and Capacity Policy

• Members asked about the effect of policies such as:
  • REGGIE / RGGI-style carbon pricing
  • PACER-type concepts
• Questions focused on how such policies might affect:
  • Electricity prices
  • Baseload generation
  • Reliability

B. Commission’s Explanation of Its Role

• The PUC stated clearly that it is an economic regulator, not an environmental regulator.
• Environmental policy decisions such as carbon pricing are handled by:
  • Environmental agencies
  • Other state or federal authorities

C. Modeling and Analysis Limitations

• The commission noted that it does not independently model complex environmental pricing programs without significant new software and resources.
• Officials indicated that external entities, such as the Independent Fiscal Office (IFO) or PJM analyses, would be better suited for those projections.

D. PJM and Cost Impact Data

• The PUC stated it could share existing PJM data or request updated analyses where appropriate.

V. Baseload Generation, Renewables, and Resource Diversity

A. Legislative Concerns About Reliability

• Members repeatedly emphasized the need to preserve reliable baseload generation.
• Questions focused on the balance among:
  • Nuclear
  • Coal
  • Natural gas
  • Renewables
  • Waste coal

B. Renewable Credit Framework Discussion

• Testimony addressed distinctions between:
  • Tier 1 credits (wind, solar, etc.)
  • Tier 2 credits (including waste coal and other resources)

C. Issues Raised

• The committee discussed:
  • Whether renewable credit policy undermines baseload reliability
  • In-state versus out-of-state sourcing of credits
  • Border restrictions for Tier 2 credit eligibility
  • The timing of credit delivery and generation.

D. Broader Policy Debate

• Some legislators argued strongly for retaining or extending the life of existing baseload plants, including:
  • Homer City
  • Keystone
• The discussion framed these resources as critical for grid reliability and energy diversity.

VI. Accessibility and Modernization of Regulatory Processes

A. Consumer Access to the PUC

• Representative Brown raised concerns about how accessible the PUC’s complaint and regulatory processes are for individuals without legal representation.

B. Commission Response

Commissioner Zirfus and staff described ongoing modernization efforts, including:

• Expanded pro se complaint procedures
• Efforts to improve public-facing intake forms
• Development of fillable forms and more accessible materials for consumers.

C. Rulemaking Modernization

• The commission referenced an ongoing review of the “135 chapters” of procedural regulations.
• The rulemaking is intended to modernize internal and quasi-judicial procedures, including matters involving:
  • Individuals
  • Small businesses
  • Attorney representation rules
  • Complaint procedures

D. Status of the Rulemaking

• Public comments had been received and were under review at the time of the hearing.

VII. Reliability, PJM Markets, and Capacity Reform

A. Wholesale Market Volatility

• Members highlighted concerns about volatility in wholesale electricity markets and the impact on customer rates.

B. Load Growth and Capacity Shortfalls

• Testimony pointed to rapid load growth, especially from data centers, as a major stressor on PJM’s capacity market.

C. Criticism of Current PJM Capacity Market

• Legislators and commissioners expressed concern that the PJM capacity market is not responding quickly enough to changing demand conditions.
• There was discussion of possible backstop auctions or other interim measures to preserve reliability.

D. Legislative Reference: Load Forecasting Accountability Act

• The hearing referenced the Load Forecasting Accountability Act, which had been enacted.
• Members cited this as evidence of legislative concern about:
  • Better forecasting
  • Greater accountability in anticipating future load and pricing impacts.

E. Potential for Market Reform Savings

• The commission noted that active advocacy in PJM stakeholder processes can produce meaningful reforms.
• Officials suggested that PJM market changes could potentially save billions of dollars in future electricity costs.

VIII. Aqua Acquisition and Utility Consolidation

A. Aqua / American Water Transaction Questions

• Representative Kale and others asked about the proposed Aqua acquisition by American Water.

B. Issues Discussed

Questions focused on:

• Public participation in the review process
• Timeline for commission review
• Whether the PUC can evaluate:
  • Fair market value concerns
  • Financial impacts
  • Broader regulatory implications of consolidation

C. Commission Response

• The commission explained that there is no statutory deadline requiring a final decision by a certain date.
• The current filing was expected to be reviewed with the aim of action by late 2026.
• Officials indicated the PUC intends to closely scrutinize:
  • Financial terms
  • Public input
  • Overall public interest impacts.

IX. Transmission Expansion, Siting, and Landowner Protections

A. Transmission Line Projects and Public Interest

A major segment of the hearing addressed major transmission proposals, including:

• NextEra / Exelon Project 237
• Other third-party right-of-way and corridor projects

B. Legislators’ Concerns

Members questioned:

• Whether these projects primarily benefit Pennsylvania
• Whether they export power out of state
• Their impact on local reliability
• How eminent domain might be used
• Whether landowners are receiving adequate due process protections

C. Commission Explanation of Jurisdiction

• The PUC explained that some transmission decisions are primarily federal matters under FERC.
• In those cases, the state’s flexibility is limited.

D. State-Level Role

The commission stated it would still:

• Scrutinize cost impacts on Pennsylvania ratepayers
• Participate in PJM tariff proceedings
• Challenge projects where appropriate if they do not adequately serve Pennsylvania’s public interest

E. Due Process and Landowner Concerns

• The committee pressed on whether federal PJM and FERC processes provide sufficient protections for Pennsylvania landowners.
• The PUC acknowledged these concerns and stated its intent to remain active in protecting state interests.

X. Alternatives to Long-Distance Transmission

A. Questions About Alternatives

• Members discussed whether PJM and utilities should place greater focus on alternatives to large transmission buildouts.

B. Alternatives Mentioned

Potential alternatives discussed included:

• Local generation
• Distributed energy resources
• Efficiency measures
• Digesters and other non-transmission solutions.

C. Policy Framing

• The hearing reflected broader concern about whether expensive new transmission infrastructure is always the best solution compared with localized generation and efficiency investments.

XI. PJM RPM Price Cap Extension

A. Legislative Questions

• The committee asked about PJM’s proposal to extend the price cap and price floor for future Reliability Pricing Model (RPM) auctions through 2028–2029.

B. Commission Response

• Commissioners and staff explained that FERC is the decision-maker on this matter.
• A decision was expected within roughly 60 days.
• The next PJM auction was scheduled for June.

C. Rationale for Price Cap Extension

• Testimony indicated that the price cap extension is intended to protect ratepayers in a market that is currently not producing adequate supply responses.
• Longer-term reforms to the capacity market remain under discussion.

XII. Large Load Tariffs, Data Centers, and Ratepayer Protections

A. Discussion of Large Load Tariff Update

The hearing addressed the proposed Large Load Tariff, which is especially relevant to:

• Data centers
• Other very large electricity users

B. Policy Objectives

The tariff was described as intended to:

• Protect existing ratepayers from stranded costs
• Prevent the public from bearing risks tied to uncertain large-load development
• Allow third-party infrastructure development to occur more quickly

C. Schedule for Action

• The commission anticipated that the tariff update could come before the full commission for a vote in March.
• Officials stressed that this was a proposed timeline and not yet final approval.

XIII. Data Centers, Water Use, and Environmental Concerns

A. Water Use Concerns

• A separate line of questioning examined the environmental implications of data center expansion, especially:
  • Water withdrawals
  • Cooling needs
  • Potential effects on aquifers and local water resources

B. Commission Response

• Commissioners noted that many data centers use closed-loop cooling systems.
• They emphasized that water usage varies significantly depending on the specific facility and location.
• Environmental oversight of these issues falls within broader regulatory frameworks beyond just the PUC.

XIV. Nuclear, Coal, Waste Coal, and Energy Diversity

A. Resource Mix Discussion

• Several members emphasized the importance of a diversified electricity supply that includes:
  • Nuclear generation
  • Coal
  • Natural gas
  • Waste coal
  • Renewables

B. Waste Coal Discussion

• Waste coal was specifically discussed as part of Pennsylvania’s energy and environmental landscape.
• Legislators referenced the tension between:
  • Environmental remediation goals
  • Cost and competitiveness of electricity generation.

XV. Broad Policy Direction and Closing Themes

A. Core Themes Repeated Throughout the Hearing

The committee consistently returned to three overarching goals:

• Affordability
• Reliability
• Responsible development

B. Priority Areas for Continued Oversight

Members emphasized the need for close scrutiny of:

• PJM market reforms
• Transmission projects and landowner protections
• Utility consolidations such as Aqua
• Large-load tariffs and data center cost impacts
• Consumer assistance and affordability programs.

C. Broader Regulatory Framing

The hearing underscored the interconnected nature of:

• State energy policy
• Federal wholesale market decisions
• Utility rate impacts on consumers and businesses.

Key Takeaways

• The PUC framed itself as an economic regulator focused on affordability and reliability, rather than an environmental policymaker.
• Affordability pressures remain severe, with a record number of utility terminations and growing concern for both households and small businesses.
• Major policy questions centered on:
  • PJM market failures and reform
  • Transmission expansion and landowner protections
  • Data center growth and large-load tariffs
  • Maintaining a diverse and reliable energy mix
  • Improving access to consumer assistance programs
• The hearing reflected broad legislative concern about balancing:
  • Grid reliability
  • Customer affordability
  • Infrastructure investment
  • Protection of Pennsylvania ratepayers and landowners.