Under settlement, PGW gas rates would go up 6.8 percent

Philadelphia Gas Works has reached a proposed settlement of a rate case under which it would receive a 6.8 percent increase, or $42 million – less than the overall 11.6 percent rate hike it requested in February.

Under the proposal, the monthly bill for a typical residential customer will increase from $94.06 to $99.94, or 6.3 percent, compared with the 11.3 percent residential increase PGW sought in its original request.

PGW’s current $12 monthly service charge for residential customers would increase to $13.75. PGW had sought to boost it to $18.

Two Pennsylvania Public Utility Commission administrative law judges are reviewing the proposed settlement, which was reached in July between PGW and the PUC staff, customer advocates and retail energy suppliers.

The settlement, which would go into effect at the end of the year, will require approval of the PUC.

The proposed settlement is more in line with the utility’s estimates from last year, when PGW told city officials that it projected it would need a $40 million rate increase this year. PGW said it filed for a $70 million request based on new calculations that the climate was warming more quickly, causing sales volumes to decline.

Because of changing weather patterns, PGW proposed to switch its forecasting method to a 10-year average, from the 30-year average it previously used to calculate the city’s projected need for heat. Under the proposed settlement, the parties compromised and agreed to allow the utility to base its needs on the average usage over the last 20 years.

Though the settlement is not yet final, the proposal has already yielded positive results for the city-owned utility.

Moody’s, the rating agency, cited the expected approval of the settlement in upgrading PGW’s debt rating to A3 from Baa1.

The improved rating helped the city to push down interest rates this week when it completed the sale of $273.1 million in PGW bonds to finance infrastructure and to refund existing debt, Philadelphia City Treasurer Rasheia Johnson announced Friday. The new debt represents a savings of $742,350 from the refunded bonds.

Under the proposed settlement, PGW agreed not to seek a general rate increase before Dec. 1, 2019.

Several issues remain unresolved after the settlement, including how PGW would allocate its “universal service” costs, which include discounts for low-income customers.