In late March 2026, PECO introduced two official requests to increase its electric and natural gas rates…again. The utility serves over a million electricity users in Southeast PA and more than 500K natural gas customers in Philadelphia. According to them (and with good reason), it is crucial for the grid to be maintained so it can keep up with the massive energy demand from the expansion of AI data centers and electric vehicles, and to facilitate access to solar projects.
However, in an unexpected twist, PECO officials have announced that they are reversing course and will no longer be pursuing the rate increases. Thanks to a strong push from Governor Shapiro and the harsh financial realities currently faced by their consumers, they have recognized that raising rates just isn’t the right thing to do at the moment. This is a huge relief for Pennsylvania families who will save $510 million (around $34 each month) in utilities. Here is a breakdown of the situation and what it means for you if you are a PECO customer.
The Context
Utilities like PECO benefit from infrastructure upgrades because they help them make money. The more projects they invest in, the more profit they can make. That’s why a hot topic in this discussion is the concept of return on equity. Return on equity (ROE) is a rate pre-set by public utilities commissions (PUCs), that contributes to a utility’s long-term profitability. Also, any request for a ROE change has to be approved by the PUC. Since this number is predetermined, utilities have a reason to invest as much as possible to maximize their profits. They also don’t have to worry about keeping expenses in check because the brunt of these costs is passed on to customers.
Currently, there’s some debate regarding what an optimal ROE should be. When they first introduced their rate increase request, PECO was leaning towards a ROE of 10.95% (after company forecasts estimated their 2027 ROE at 5.7%). However, critics argue a rate of 8.5%-9.5% is more appropriate. So it really depends. A smaller percentage is better for consumers as it helps them save more but a higher number is better for utilities as it helps them attract investors, remain financially viable and protect their bottom line.
However, the issue that utilities are facing currently is they are losing money since more people are now relying on sustainable energy sources. Thanks to the clean energy movement and people being determined to fight back against skyrocketing bills, more and more people are looking for ways to reduce their grid dependence and save money by relying on clean energy sources like solar as well as battery storage options. This directly affects the utility’s financial goals because with less people relying on grid energy, the demand for grid energy starts decreasing. This discourages investment in maintenance and construction projects that utilities depend on to earn revenue.
What This Means For You
It goes without saying but had this rate increase gone through, it would have exacerbated the burden of already sky-high bills on families in Pennsylvania. The reality is, customers don’t have much of a say in whether or not these increases happen. It’s promising that communities and the governor made their voices heard and were able to effect change this time. However, that might not be the case for the next rate hike.
That’s why consumers should focus on what they do control: their response to these rate hikes. Continue speaking out and advocating for yourselves when unreasonable hikes are being discussed. Involve your elected officials. But even besides this, explore alternatives to make your home more energy efficient. These will help you become energy independent so you’re relieved from the weight of unpredictable rate hikes and you can actually reduce your energy bills. For instance, options like rooftop solar or community solar are worth considering. Joining a community solar farm requires no commitment and could help you cut up to 25% of your electric bill. And although setting up your own roof panels requires an initial investment, this helps you reduce your grid dependence so you can lower your electric bills over the long run and finally gain some peace of mind.
Curious about community solar and how it can help you reduce your bills and gain some breathing room? Reach out to us and a member of our team will answer any question you may have.