PUC Rate Process

The Utility Rate Setting Process

Introduction

When a regulated utility wants to raise rates, the Pennsylvania Public Utility Commission (PUC) has a well defined process that must be followed. Here is a link to the PUC's summary of their process: (LINK)

What follows uses an example of a rate case filed by Aqua Pennsylvania to raise rates for both its water and sewer customers. Although this is specific to Pennsylvania, most states follow a similar protocol for publicly regulated utilities.

In Pennsylvania some of the case related documents are publicly available via a website "docket". Here is the docket for the example case that follows: (LINK).

The Start - Aqua Files For A Rate Increase

The process begins when a regulated utility files for a rate increase. Since it is an involved and expensive process, it is not an everyday event. For the Big Water Companies in Pennsylvania, it typically happens every two to three years.

For this example, Aqua filed a notice with the PUC on May 23, 2024. At the same time they also filed 17 volumes of required information supporting their request. Those 17 volumes totaled over 4,500 pages. Clearly, a lot of preparation went into this filing.

Volume one of those filings proposed increased water and sewer rates that would go into effect on July 22, 2024 - just two months after filing. That date is a bit amusing because everyone knew full well that rates would not go up on that date. The next section explains why.

Customers are also notified. On May 25, 2024 I received the following "Dear Customer" letter:

Other Parties Promptly Get Involved

In Pennsylvania, two organizations have been created to advocate for public utility customers.

The Office of Small Business Advocate (OSBA)

The Office of Consumer Advocate (OCA)

Both automatically get involved in rate cases. They each filed formal complaints about the rate case - the OSBA on May 29, 2024, and the OCA on June 3, 2024. They claimed there were issues that needed investigation and that the proposed rate increase should be suspended until those issues were resolved. These complaints are essentially routine procedure. The PUC responded on June 13, 2024 with an order suspending the increase and launching an investigation. This action was also standard procedure. PA state law requires the investigation be complete within nine months. Therefore, the PUC's suspension pushed back the effective date of the rate increase to February 22, 2025.

The PUC itself has a division called the Bureau of Investigation & Enforcement (I&E). This organization is also a major player in rate cases. Very often OSBA, OCA and I&E are aligned on their positions in a rate case.

There also are usually other players. They generally focus on specific issues rather than the rate case in total. For example, CAUSE-PA is an organization advocating for low income individuals. Another example is the Aqua Large Users Group.

Many individuals file formal complaints but are generally not active participants in the rate case. Often these complaints are of the "oh woe as me" type bemoaning higher costs for water or sewer. They do not carry any weight in the rate setting process.

Early Activities

Interrogatories

OCA, OSBA and I&E will review the utility filings and submit questions about them. These are called "interrogatories". They are not publicly available. In fact, copies were only sent to the OCA, OSBA, I&E and Aqua. These interrogatories were submitted between May 31, 2024 and June 12, 2024.

Prehearing Conference

An Administrative Law Judge (ALJ) is assigned to administer the rate case. For this case two were assigned. One of their early activities is to get the various parties together for what is termed a "Prehearing Conference" The following notice was sent to 22 parties and the meeting is apparently open to the public:

Scheduling Order

This is a document that essentially set the timeline for the case. It was a 19 page document sent to a long list of people. It can be viewed here: (LINK). A key summary table from the order is:

Core Activities

Public Hearings

For Aqua's case nine public hearings were held at five locations scattered around the state. Plus, there were two more held via telephone. Logistically, this is a major undertaking. All the major parties to the case are present at each hearing. A court reporter records all the testimony. Essentially anyone can come and express their thoughts about the rate case. Much of the testimony is people expressing concern about being able to afford the rate increase. Occasionally there are specific complaints about service. Rarely, someone praises the utility company.

One of the public hearings was in our backyard of New Garden Township. All three Co-Founders of Keep Water Affordable testified. Our testimony can be found here:

Pete Mrozinski (LINK)

Margo Woodacre (LINK)

Bill Ferguson (LINK)

Testimony & Evidentiary Hearings

We really do not know very much about this phase of the process. There are indications that various subject matter experts are called upon to testify. The Evidentiary Hearings are apparently open to the public. At least they are announced in advance to the public (LINK).

Main Briefs

This is a major milestone in the process. Each party to the case takes all the information presented and states their case. The utility usually claims justification for everything they asked for. The other parties challenge specific items in the rate case. These documents are generally tedious to read. However, they provide a good overview of the issues. Examples for Aqua's rate case include:

Aqua (LINK) - 82 pages

OCA (LINK) - 59 pages

I&E (LINK) - 18 pages

OSBA - none found

Reply Briefs

This is the opportunity for each party to point out issues with the Main Briefs of others. It is sort of a legal jockeying back and forth. This mostly ends each party presenting their position to the PUC. The main examples for Aqua's rate case are:

Aqua (LINK) - 56 pages

OCA (LINK) - 36 pages

I&E (LINK) - 14 pages

Settlement & Recommended Decision

Settlement agreement

In this rate case the major parties came to a settlement agreement on most, but not all, of the issues. This is something the PUC encourages but does not require. A settlement can occur at any point in the process. In this case it was announced at the same time the Reply Briefs were filed.

The Settlement Agreement can be found here (LINK). It is a hefty 529 pages. The actual agreement is covered by pdf pages 11 - 37. The rest of the document is attachments detailing rates, revenues and customer impacts.

Recommended Decision

This is the normal next step after the Reply Briefs. The Administrative Law Judge evaluates all the information that has been presented and makes a recommendation to the PUC Commissioners on each issue. This is all summarized in a formal document called a Recommended Decision. It carries a lot of weight but is not binding on the Commissioners.

The Recommended Decision for Aqua's can be found here: (LINK). At 192 pages it is fairly long. It goes through the case issue by issue. It summarizes the issue, states the position of each party and recommends a disposition of that issue.

Exceptions & Reply Exceptions

Exceptions

Exceptions are the opportunity for the major parties in the case to protest that the ALJ got something wrong in the Recommended Decision. It is the major parties speaking directly to the PUC Commissioners. Examples include:

Aqua (LINK) - 454 pages. However, most of that is refiling attachments to correct previous errors. Only pdf pages 11 - 30 are Exceptions.

The OCA and I&E did not file exceptions.

Reply Exceptions

This is the opportunity for the major parties to comment on any Exceptions filed by the other parties. Again, it is each party speaking directly to the PUC Commissioners, generally disagreeing with something in the Exception filing. Reply Exceptions for Aqua's rate case included:

Aqua (LINK) - 39 pages

OCA (LINK) - 20 pages

I&E (LINK) - 13 pages

PUC Opinion & Order

This is essentially the end of the process. The Commissioners take the Recommended Decision, Exceptions and Reply Exceptions and make a final decision. It is voted upon at one of the regularly scheduled public meetings of the Commissioners. Then a formal Opinion and Order is posted. Here is the Opinion and Order for Aqua's rate case: (LINK). It is 185 pages. In this case the Commissioners accepted the Recommended Decision with only trivial changes.

The decision can be appealed through the Pennsylvania court system. But, that is not common.