PA Public Utility Commission Issues Secretarial Letter Regarding COVID-19 Cost Tracking and Creation of Regulatory Asset

Last week, the Pennsylvania Public Utility Commission (“Commission”) issued a Secretarial Letter to address nonrecurring expenses that public utilities have incurred as a result of complying with Governor Wolf’s Emergency Proclamation and the Commission’s own Emergency Order (“Emergency Order”). In the Secretarial Letter, the Commission directed all jurisdictional electric, natural gas, water, wastewater, steam and telecommunications utilities to “maintain detailed records of the incremental expenses incurred for the provisioning of utility services used to maintain the health, safety, and welfare of Pennsylvania customers” during the pandemic. Also, utilities must track any loans, grants, assistance, or other benefits received in response to the pandemic, regardless of form or source, that would help offset any such COVID-19 related expenses.

Additionally, the Commission authorized electric, natural gas, water, wastewater, steam, and all rate base/rate of return telecommunications utilities to create a regulatory asset for any “incremental uncollectible expenses” experienced above those embedded in rates since the Commission issued the Emergency Order. In order for such expenses to be included as a regulatory asset, each utility must maintain detailed records of the “incremental extraordinary, nonrecurring expenses” incurred as a result of complying with the Emergency Order.

Finally, the Commission recognized that most, if not all, of Pennsylvania’s certificated Incumbent Local Exchange Carriers (“ILEC”) may experience extraordinary revenue or expense impacts that might qualify as an “exogenous event” under Chapter 30 of the Public Utility Code’s alternative regulation plan price cap. In order to be eligible for recovery as a COVID-19 “exogenous event,” the utility must maintain detailed records of the “extraordinary, nonrecurring incremental expenses” that resulted from complying with the Emergency Order and the Federal Communications Commission’s Keep Americans Connected Pledge.

Once a utility establishes a regulatory asset, it must file a notice with the Commission and serve it on the Commission’s Bureau of Investigation and Enforcement, the Office of Consumer Advocate, and the Office of Small Business Advocate. In future proceedings, the Commission will determine whether each utility’s request to recover a regulatory asset or exogenous event related to the Emergency Order is just and reasonable in accordance with Sections 1301, 1308 (if applicable), and relevant Chapter 30 plans. The Secretarial Letter concludes by instructing the regulated entities “to claim the deferred expenses at their first available opportunity.”