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HARRISBURG — As Pennsylvanians struggle with rising energy prices, Gov. Josh Shapiro wants the commonwealth’s utility companies to control costs and stop seeking “unacceptably high” rate increases.
Otherwise, the Democratic governor warned in a recent letter to utility leaders, he will “vocally and forcefully” oppose their requests for rate hikes.
“We have reached a tipping point,” Shapiro wrote in the letter, which was obtained by Spotlight PA. “This is a moment to put your customers first and change the behaviors causing rate increases.”
Energy bills are rising across Pennsylvania and nationally, driven by a number of factors — some of which are beyond utilities’ control. The rapid growth of data centers has contributed to a surge in demand for electricity, prompting a spike in wholesale prices, which, in turn, drives up residents’ bills.
But Shapiro argues that utilities’ “excessive” rate increases are a core driver of rising costs and he wants to fundamentally change how those rates are set.
The governor’s letter lays out three steps he wants companies to take when seeking rate increases, including changes to how they finance infrastructure investments and how their profits are determined.
It’s unusual for a governor to intervene directly in the rate-making process. Shapiro has no formal role in determining the rates utilities can charge, which must be approved by the state Public Utility Commission, an independent agency. Instead, he appears to be betting on the power of the bully pulpit to get the companies to change their business practices.
In a response to the governor, the Energy Association of Pennsylvania, which represents electric and natural gas utilities, did not address whether its members will comply with his demands.
The companies follow the process established by state law when seeking rate increases, wrote Andrew Tubbs, the group’s president and CEO.
Elizabeth Marx, executive director of the Pennsylvania Utility Law Project, which advocates for low-income utility customers, called the letter “a huge step forward that really needed to happen.”
But, she cautioned, the proposals Shapiro outlined would not immediately reduce residents’ bills without buy-in from the Public Utility Commission, and other legislative reforms.
In a statement, a spokesperson for the commission said the agency “evaluates each rate case through a formal, transparent process” and that its decisions are “based on the specific facts and evidence in the case record.”
Addressing Pennsylvanian’s rising energy bills has been a major focus for Shapiro, who last year negotiated an agreement with the region’s grid operator to lower a cap on wholesale electricity prices and is pushing for further changes.
The governor’s latest salvo against the state’s utility companies comes after he successfully pressured PECO, the largest electricity company in the commonwealth, to back off a proposed rate hike that he described as “pure greed.” In an unprecedented move, PECO withdrew the request and its CEO later stepped down.
Shapiro’s office has received a steady stream of messages from Pennsylvania residents squeezed by their utility bills, records obtained through the state Right-to-Know Law show.
“I can’t believe how high our energy bill is and there seem[s] to be no relief,” one resident wrote in an email to the governor’s office in January.
“The cost of electric is untenable for working families,” someone else wrote.
“Can you please do something about the unbelievable rising costs of heating our home?” another resident asked.
In 2025, a record number of households had their electricity or natural gas service shut off after falling behind on their bills, according to the Pennsylvania Utility Law Project.
Terminations have increased by more than 25% since 2022, breaking new records each year of the past three years.
Profits under scrutiny
The Public Utility Commission is an independent state agency that determines how much utilities can spend, how much they can charge their customers, and how much they can earn in profits. Commissioners are appointed by the governor and must be confirmed by the state Senate.
The commission evaluates utilities’ rate requests in complex legal proceedings, which often involve public hearings, testimony from expert witnesses, and thousands of pages of documents.
In 2024, utilities sought an unprecedented number of rate increases, straining the commission’s time and resources, Chairman Stephen DeFrank told lawmakers at a hearing earlier this year.
In theory, the rate-making process finds a balance between keeping rates affordable for customers while ensuring that utilities can invest in the infrastructure needed to ensure reliable service and maintain their own financial stability. By law, utilities are entitled to recover “reasonably incurred” expenses, as well as a fair return on their investment.
But consumer advocates have long argued that the process is skewed in favor of utility companies, allowing them to earn higher returns on their shareholders’ investment at customers’ expense.
Too often, Shapiro said in his letter to utilities, determinations about their profits amount to little more than “educated guesses.”
Instead, Shapiro wants utilities to account for the returns their shareholders earn via a competitive, market-based process, or accept a rate of return broadly in line with the stock market as a whole — a major change that could significantly lower profits for the companies.
Mark Ellis, a consultant who previously worked for one of the largest utility holding companies in the U.S., has long called for this kind of change.
No state currently takes this approach, he said, which would rely on competition, instead of a regulator’s determination, in setting utilities’ profits — similar to the way those companies currently raise debt.
The move “changes the entire incentive structure for how utilities spend ratepayer money,” Ellis said, “finally bringing market discipline to the most important place it’s been missing.”
Shapiro also wants utilities to lower costs by changing how they raise money for infrastructure projects and to explain more clearly how those investments will benefit customers.
In his budget address in February, Shapiro also announced that four of Pennsylvania’s largest electricity companies had voluntarily agreed to end so-called “black box” settlements that obscure how much profit they earn from rate increases and eliminate reconnection fees for customers whose service was shut off.
Shapiro says utilities must file a description of how they will comply with these principles with an attorney in his office focused on energy affordability, a newly created position that was filled in late April.
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