PA PUC Requested by Statutory Advocates and Two NGDCs to Examine The Practice of Natural Gas Flexible Pricing or Negotiated Discount Rates
Historically the Pennsylvania Public Utility Commission (PUC) has permitted natural gas distribution companies (NGDCs) to use flexible pricing or “flex” contract rates to attract or retain large customers who have other energy alternatives. The reasoning has been that “half a loaf is better than none,” and that such revenues, which cover and exceed marginal cost, contribute positively to overall cost of service. The result is a benefit to the large customer, the utility, and all customers generally. Moreover, in terms of retaining a customer, the argument in favor of the status quo is that other ratepayers benefit as they do not bear the revenue burden of stranded investment or a smaller revenue pot over which to apply costs. The NGDCs have generally been able to recover from other ratepayers the difference between the “flex” rate and what would have otherwise been charged under an ordinary general tariff rate.