HARRISBURG — As rising energy prices drive up the cost of the customer assistance programs that Pennsylvania electric and natural gas utilities are required to offer, the question of who should pay for them is still hotly disputed.
In Pennsylvania, those costs are shouldered solely by residential customers. Businesses and factories don’t have to contribute, unlike in other states.
The programs offer much-needed relief for the most vulnerable Pennsylvanians, lowering monthly bills and offering a path to debt forgiveness. But as energy costs increase, the price tag for the programs also rises, increasing the burden on residential ratepayers — most of whom don’t qualify for help.
In 2024, residential electricity customers paid almost $90 on average toward the cost of the programs, state data show. For natural gas customers, the average cost was around $47.
Consumer advocates have argued for years that those costs should be spread across all customer classes.
As energy costs increase, the assistance programs “get more expensive, for the same benefit,” said Patrick Cicero, an attorney at the Pennsylvania Utility Law Project who previously served as the state’s consumer advocate.
The state Public Utility Commission “all along should have been assigning these costs to all rate classes,” Cicero said.
Industrial and commercial ratepayers say they shouldn’t have to pay for assistance they can’t participate in and don’t benefit from.
In 2019, the PUC reversed its position on the issue, encouraging utilities to share the costs more widely. But utilities were not required to do so, and in practice, residential customers continued to foot the bill.
More recently, regulators have issued guidelines on how large data centers should pay into the assistance programs to help offset the price increases they cause. The guidance isn’t binding, and it’s not yet clear how closely utilities will follow it.
The utility commission also approved a recent settlement in a rate case filed by PPL Electric Utilities that requires data centers to make an annual contribution to the assistance programs.
Consumer advocates say those changes, while necessary, don’t solve the underlying unfairness in the way Pennsylvania pays for customer assistance.
Given the commission’s guidance and the increased need for assistance, the utility commission “anticipates seeing broader cost recovery proposals from utilities, advocates, and other stakeholders,” said Nils Hagen-Frederiksen, a spokesperson for the agency.
“The PUC stands ready to consider those proposals.”
Cost questions
Electric and natural gas utilities are required to offer several forms of assistance for low-income customers. These include discounted bills and debt forgiveness, as well as energy efficiency programs and referral services for customers experiencing temporary hardships.
In 2024, utilities spent more than $580 million on the programs, state data show. With one exception, they recovered those costs entirely from residential customers, mostly through extra charges.
Not all states require utilities to offer assistance programs; among those that do, all except Pennsylvania spread the costs across all customer classes, so that industrial and commercial ratepayers contribute as well, according to experts and testimony in PUC proceedings.
Requiring small businesses, already battered by the pandemic and high inflation, to help pay for the assistance programs could be “their death knell,” the state’s Small Business Advocate has argued in utility filings..
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As Pennsylvania manufacturers compete against other states and countries, “electricity costs are a live factor in where the next expansion or the next line goes — and the associated jobs,” Rod Williamson, executive director of the Industrial Energy Consumers of Pennsylvania, a trade group, told Spotlight PA via email.
Regulators in other states with bill assistance, however, have largely accepted arguments that since the programs serve the public interest, everyone should pitch in — even if the different customer classes don’t always contribute equally, said John Howat, senior energy analyst at the National Consumer Law Center.
‘Residential class’ problems
The PUC reconsidered the question of how to pay for utility assistance during a review that began in 2017.
At issue was a fundamental principle of utility policy, known as “cost causation” — the idea that customers should pay for the costs they incur.
Representatives for industrial and commercial customers argued that the status quo should prevail, contending it would be unfair for businesses to help pay for assistance they couldn’t receive.
Consumer advocates countered that, under a literal interpretation of the cost causation argument, most residential customers shouldn’t have to pay for the programs either, since only low-income customers can participate. They argued that affordable utility service is a public good with broad social benefits.
Recovering the costs from residential customers put a “significant burden” on those households, the PUC concluded, noting that increased program costs would make bills “increasingly unaffordable” in the years to come.
“Poverty, poor housing stock, and other factors that contribute to households struggling to afford utility service are not just ‘residential class’ problems,” the commission wrote in a 2019 order.
Reversing its previous position, the utility commission updated its regulations to say that, “No rate class should be considered routinely exempt” from contributing. Two commissioners opposed the change.
The policy update made it clear that utilities could share the cost of the programs more widely, but did not require it.
In practice, little changed.
Earlier this year, when the commission released guidance intended to shield residents from cost increases caused by data centers, it noted that the burden of paying for assistance programs is “currently borne solely by residential electric customers.”
The PUC recommended that data centers contribute between $250,000 and $1 million to the assistance programs each year, depending on their size. The guidelines do not “predetermine the outcome of individual utility proceedings,” said Hagen-Frederiksen, the commission’s spokesperson.
Separately, the utility commission in June approved a settlement of a rate case filed by PPL Electric that requires large data centers to contribute $11 million each year to the utility’s assistance programs, starting in 2027. It’s the first time in recent years there’s been a change in how those costs are covered.
Elsewhere, the argument over how to pay for the assistance programs continues.
In a rate case filed earlier this year by Peoples Natural Gas, consumer advocates are again arguing that assigning the costs only to residential customers is unfair. (The recent data center guidelines don’t apply to natural gas utilities.)
The company responded that such a change would inappropriately single out its commercial and industrial customers, while similar customers of other utilities wouldn’t have to pay those costs.
If the PUC wanted to allocate assistance costs more broadly, an expert witness for the utility said, “it is important that the policy be implemented consistently,” rather than on a case–by-case basis.
That type of statewide consistency, Hagen-Frederiksen said, “would be most effective if it was issued by a statute enacted by the Pennsylvania General Assembly.”