Bill Impact Analysis of PA Policy Addressing PJM ROE Adder
Evergreen Action
Project completed.
Synapse calculated a high-level estimate of annual electric bill savings achievable for Pennsylvania residential customers from proposed legislation. Pennsylvania House Bill 2755 would eliminate the return on equity (ROE) adder that utilities currently receive for participating in PJM markets, which imposes unnecessary costs on consumers. We estimated, in million-dollar and dollar-per-household terms, the difference between a future with the policy and a status quo future without the policy.
We found the following:
- The biggest driver behind the estimated savings from reducing ROE is the magnitude of transmission spending.
- Removing the ROE adder may save residential customers $2 per customer per year or $13 million statewide per year based on the latest annual transmission spending data.
- Bill savings may range from $1 to $7 per household per year depending on the PJM zone.
- Customers in PECO Energy Company (PECO), Duquesne Light Company (DQE), and FirstEnergy zones have estimated bill savings of around $1 per year.
- Customers in PPL Electric Utilities (PPL)’s service territory, which represents 24 percent of residential customers in Pennsylvania, have estimated bill savings of just under $7 per year. This higher level of avoided costs is due to higher pre-tax income costs (i.e., higher spending) in PPL than in the other utility zones: PPL’s pre-tax income was $618 million, roughly five times higher than PECO’s, eight times higher than DQE’s, and double FirstEnergy’s.