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An en banc Commonwealth Court has upheld a ruling that a base rate increase in distribution of PECO's energy services is not anti-competitive.

The court's June 2 ruling is a rejection of energy provider NRG's argument that PECO's stated price-to-compare was too low and did not reflect the actual costs to customers, putting other service providers at a competitive disadvantage. PECO, the state's default service provider, or DSP, is responsible for obtaining sufficient electricity for those Pennsylvanians who don't shop for an electric generation supplier (EGS).

According to Judge Renee Cohn Jubelirer's opinion, NRG proposed a modification of PECO's plan, with a different methodology to allocate a percentage of indirect costs between PECO's distribution and default services, treating them as two separate sections of PECO's operations. However, the state Public Utility Commission did not agree with NRG's methodology.

On appeal, NRG argued that the commission erred in accepting PECO's cost allocations and rejecting NRG's alternative methodology because, according to Jubelirer, the commission did not apply the proper burdens of proof, NRG argued, and the commission's approval is inconsistent with the Electricity Generation Customer Choice and Competition Act and prior decisions from the Commonwealth Court and the commission. NRG also argued that the commission's determinations are not supported by substantial evidence.

However, the court disagreed and pointed to expert testimony accepted by the board.

"We conclude a reasonable mind would accept PECO's … credited evidence as sufficient to support the conclusion that PECO's rate and cost allocations were just and reasonable. In contrast, because the commission rejected NRG's evidence as not credible or compelling, the commission's finding that NRG did not meet its burden of proof on its proposed cost allocation is likewise supported. Therefore, there is substantial evidence to support the commission's opinion and order," Jubelirer said.

"The Competition Act was intended to help consumers by creating a more competitive electric market through the unbundling of the three functions of the market," she continued. "However, the Competition Act also created a safety net, a DSP, to provide electricity for distribution customers should they choose not to shop for generation services or should an EGS fail to provide service. While we acknowledge NRG's desire to promote what it believes would be a fairer market that would enhance competition, the commission was not persuaded by NRG's evidence and arguments. Therefore, we affirm the commission's opinion and order."

Kenneth Kulak of Morgan, Lewis & Bockius represents PECO and did not respond to a request for comment.

A spokesman for NRG said in an email, "We are disappointed with today's decision. True energy competition can only be achieved if the rates and prices consumers see are accurate and fair. An independent study, performed by a respected forensic accounting firm, showed that was not the case because all customers in the PECO territory are overpaying for delivery services. We will continue to work with the PUC and other stakeholders to ensure that distribution costs are fairly allocated."