Different Electricity Rates for Different Classes of Service
In Philadelphia Suburban Transportation Company v. Pennsylvania Public Utility Commission, 3 Pa. Commw. 184, 281 A.2d 179, 186 (Pa. Cmwlth. 1971), the Court quoted with approval the following language from a Commission opinion in another case as properly descriptive of the principles applicable to the fixing of reasonable rate schedules:
There is no requirement that rates for different classes of service must be either uniform or equal or that they must be equally profitable.
Differences in rates between classes of customers based on such criteria as the quantity of electricity used, the nature of the use, the time of the use, the pattern of the use, or based on differences of conditions of service, or cost of service are not only permissible but often are desirable and even necessary to achieve reasonable efficiency and economy of operation.
Rate structure, which is an essential, integral component of rate-making, is not merely a mathematical exercise applying theoretical principles.
Rate structure must be based on the hard economic facts of life and a complete and thorough knowledge and understanding of all the facts and circumstances which affect rates and services; and the rates must be designed to furnish the most efficient and satisfactory service at the lowest reasonable price for the greatest number of customers, i.e., the public generally. While cost to serve is important, other relevant factors may also be considered.
In a later case, Philadelphia Suburban Water Company v. Pennsylvania Public Utility Commission, 808 A.2d 1044, 1060 (Pa. Cmwlth. 2002), where a rate was being challenged as unreasonable, the Court stated:
In order for a rate differential to survive a challenge brought under Section 1304 of the Public Utility Code, 66 Pa. C.S. 1304, the utility must show that the differential can be justified by the difference in costs required to deliver service to each class.
The rate cannot be illegally high for one class and illegally low for another. Allegheny Ludlum Corp., 149 Pa. Commw. 106, 612 A.2d 604 at 611.
Overall, the rate differentials must advance efficient and satisfactory service to the greatest number at the lowest overall charge.