On March 28, 2018, Duquesne Light Company (Duquesne) filed a base rate case with the Pennsylvania Public Utility Commission (PUC) to increase rates annually by $133.8 million. Buried deep in that proposal is a request to raise rates for backup power for non-utility generating facilities from $2.50 per kW to $8.00 per kW — a 220 percent increase. Additionally, Duquesne proposes to keep existing tariff language that requires customers to pay twice the backup service rate where contracted capacity is exceeded. In those situations, backup service rates will increase from $5.00 per kW to $16.00 per kW.

Backup power is electricity that Duquesne provides to non-utility generating facilities when the customer’s generation facility is out of service for maintenance or other reasons. This rate applies to cogeneration systems and small power production facilities. Duquesne’s proposed rate increase is scheduled to take effect May 29, 2018, but will most likely be delayed while the PUC investigates the proposal.

The ultimate result of the investigation of the backup power rate could depend, in part, on a statement of policy¹ that the PUC adopted on April 5, 2018 — about a week after Duquesne filed its proposed rate increase. The statement of policy is intended to encourage electric distribution companies (EDCs), such as Duquesne, to support the development of combined heat and power (CHP) systems. CHP systems concurrently produce electricity or mechanical power and heating/cooling from a single source of energy.²

In its order adopting the statement of policy, the PUC recognized that one barrier to the development of CHP is the cost of purchasing backup power during planned plant maintenance and unplanned downtime of the CHP system. This is precisely the type of power that is subject to Duquesne’s backup power rate. The statement of policy noted that the PUC has jurisdiction over tariffs, rates, rules, and programs of EDCs that may affect CHP projects and the statement of policy encourages EDCs to support the development of CHP by, among other things, reducing the barriers to CHP deployment in their service territories.

The PUC acknowledged, however, that certain issues were beyond the scope of the statement of policy proceeding and will need to be litigated through rate proceedings.³ Setting rates for backup power is one example of an issue that will need to be addressed in further PUC proceedings. Duquesne’s rate proceeding will be one of many cases in which the Commission may attempt to implement the new statement of policy to promote CHP.