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PPL Corp.’s (PPL) Unit Files for Rate Increase in Pennsylvania

By: Zacks Equity Research |

PPL Electric Utilities, a unit of PPL Corporation, filed a request with the Pennsylvania Public Utility Commission (“PUC”) for increasing delivery rates in the state. The rate increase will impact all customer categories, including residential, commercial and industrial. If approved, the new rates will be effective from Jan 1, 2016 and PPL Electric will collect an additional $167.5 million annually.

Currently, a residential customer, consuming 1,000 kilowatt-hours (“kWh”) per month, who does not shop for electricity supply, pays $147.31. If the revised rates are approved, customers will be paying $157.50 per month, up around 6.9% from the previous rate. Approval of the latest hike, however, will not impact residential customers much as around 65% of them use less than 1000 kWh each month.

On the other hand, upon approval, the total bill for a commercial customer using 1,000 kWh with a maximum demand of 3 kilowatts, and an industrial customer using 150,000 kWh with a maximum demand of 500 kilowatts will come in at $131.95 and $13,524.75, respectively, per month.

The purpose of the latest filing is to accumulate funds for the company’s ongoing reliability projects.

It is a normal practice for regulated utility providers to recoup their previous investments through the filing of rate hike appeals to the commission. Prior to this, PPL Electric had received a rate hike approval from the PUC in 2012.

Approval of the rate hike by the PUC will encourage PPL Electric to invest more in upgrading its utility systems in order to provide uninterrupted and more reliable services to its customers.

PPL Electric continually upgrades its utility systems so as to expand its operations. In the past decade, it invested around $4.7 billion in the modernization and upgrade of its utility delivery systems. The company plans to spend an additional $5.7 billion in the coming five years.

Between 2015 and 2019, PPL Corp.’s estimated capital expenditure (excluding investments at its supply business) stands at around $17.6 billion, including $3.6 billion allocated for 2015. The company’s capital investments primarily focus on the development and upgrade of its generation, transmission and distribution facilities. These projects will enable the company to provide reliable services to its customers, going forward.

PPL Corp. currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include DTE Energy Co., NextEra Energy, Inc. and Public Service Enterprise Group Inc., each carrying a Zacks Rank #2 (Buy).