PPL Electric Utilities, a subsidiary of PPL Corporation (PPL), has flied a settlement agreement with the Pennsylvania Public Utility Commission (PUC). The agreement calls for a $77.5 million (or 1.6%) increase in annual revenues, beginning January 1, 2011.
 
This agreement replaces the company’s previously filed rate proposal, which requested additional revenues of roughly $115 million.
 
The proposal is subject to a recommended decision by an administrative law judge, including his view of the settlement agreement, before any formal decision by the PUC. An administrative law judge is expected to issue a decision in the case this fall and the PUC is expected to have a final ruling on the matter by year end.
 
The proposed $77.5 million increase would only affect the distribution portion of customers’ electric bills. Distribution accounts for about one-fourth of the typical electric bill. The increase still awaits the approval of an administrative law judge and the commission.
 
The increase proposed in the settlement agreement, if approved, would enable the company to recover the costs of nearly three years of improvement to its distribution system. Furthermore, it will help PPL strengthen reliability and maintain quality service to its customers.
 
Management stated that such rate increases are critical for PPL, as the company continues to increase investments to modernize its delivery system and upgrade the aging infrastructure.
 
PPL Electric Utilities has invested more than $960 million in its distribution system over the past five years. It plans to spend more than $1.5 billion on capital investment in the distribution system over the next five years.
 
We believe the proposed settlement is a positive for the company as it will boost its ongoing development of the distribution system. Going forward, we believe the regulatory environment in Pennsylvania will continue to be constructive, providing opportunities for better development in the region through additional rate reliefs.
 
PPL Electric Utilities, a unit of PPL Corp., provides electricity delivery services to about 1.4 million customers in Pennsylvania. It ranks among the best companies for customer service in the United States.
 
We currently have a Neutral recommendation on PPL shares.
 
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