Philadelphia Gas Works says it needs an 11.6 percent rate boost to offset the effects of warmer winter weather, but its proposal generated a cold response Tuesday at the first of four public hearings in Philadelphia.

"Pennsylvania customers try hard to live within their means," said Colmon Holmes, an AARP spokesman who was among about 30 people attending the hearing Tuesday at the Pennsylvania Public Utility Commission's Philadelphia office. "PGW should do so, as well."

PGW’s proposal, which would generate $70 million more revenue annually for the utility, would increase the average monthly bill for a residential customer using 76 thousand cubic feet (Mcf) of gas per year to $104.65 from $94.06 per month, or 11.3 percent.

The city-owned utility says it needs higher rates to maintain revenue to counter declining consumption resulting from warming weather trends. The increase is concentrated in a proposed 50 percent boost of the fixed customer charge, from $12 a month to $18.

Nora Levitt, a retired Philadelphia resident, testifies Tuesday against PGW's proposed 11.6 percent rate increase at a Pennsylvania Public Utility Commission hearing in Philadelphia. 5/9/2017 (ANDREW MAYKUTH / STAFF)
Andrew Maykuth/Staff
Nora Levitt, a retired Philadelphia resident, testifies Tuesday against PGW's proposed 11.6 percent rate increase at a Pennsylvania Public Utility Commission hearing in Philadelphia. 5/9/2017 (ANDREW MAYKUTH / STAFF)

Residential gas consumption has declined 15.4 percent since 2010, from 91 Mcf for a typical household to about 77 Mcf last year. The reduction is partly due to more-efficient furnaces and appliances, but PGW said it mainly reflects warming weather trends, which reduce the need for heat.

Nora Levitt, a retired Philadelphia resident, said it was ironic that the utility encourages its customers to conserve energy and then justifies a rate increase because natural-gas sales are in decline. "It's kind of like we are being punished for doing what you told us to do." she said.

In preliminary filings with the PUC, several advocacy groups said they planned to challenge PGW's assumptions for seeking the rate increase.

PGW has proposed to change the method by which it forecasts its gas sales. Like other utilities, PGW has used a 30-year weather average to calculate the city's projected need for heat. With warming trends, PGW says, the 30-year projection has become increasingly inaccurate, prompting it to seek a change to a 10-year history.

The filing would be PGW's first base-rate increase since 2009, but the PUC has approved five surcharges on PGW customers since 2013 to pay for infrastructure improvements, energy-conservation measures, and post-retirement employee benefits.

Consumer advocates also are expected to challenge PGW's methodology for allocating a higher rate increase to residential customers, who make up most of the utility's 500,000 customers. The utility says it costs more to serve residential customers.

Under PGW's proposal, the total bill for a typical commercial customer account, with use of 332 Mcf a year, would increase to $342.15 a month from $327.07, or about 4.6 percent.

Rates for a typical industrial customer account, with use of 717 Mcf a year, would decrease to $694.58 per month from $712.81, or by about 2.6 percent.

The utility said it has cut expenses as best as it could, noting that it reduced payroll by 36 employees in seven years, to 1,650.

PGW said it also has tried to expand moneymaking ventures to nonresidential customers, such as boosting sales for natural-gas vehicles and to buyers of liquefied natural gas produced at its Port Richmond plant.

It is also aggressively seeking new industrial and commercial customers that generate power and heat on-site, saying the sales to those customers help reduce the pressure on residential rates. One of its more promising new customers would be SEPTA's proposed 8.8-megawatt $26.8 million power plant in Nicetown, which climate-change activists have opposed.

Without a rate increase, PGW said, its improved bond rating might be imperiled, causing borrowing costs to increase and ultimately costing customers even more.

In addition to Tuesday morning's hearing, the PUC was to conduct a session at 6 p.m. at the Dorothy Emanuel Recreation Gymnasium, 8501 Provident Ave. On Wednesday, hearings are scheduled for 10 a.m. at the Free Library of Philadelphia, 1901 Vine St.; and 6 p.m. at the George Washington High School Auditorium, 10175 Bustleton Ave.

Deputy Chief Administrative Law Judge Christopher P. Pell and Administrative Law Judge Marta Guhl, who are hearing the testimony, will make a recommendation on the rate request later this year. The PUC has set a Nov. 28 target date for its decision on PGW's request. A rate increase would go into effect Jan. 1.