PECO Electricity Rates: The December 1 Increase and Amazon Deal Implications
The Federal Energy Regulatory Commission, or FERC, just signed off on a transmission service agreement between PECO Energy and Amazon Data Services. On the surface, it sounds like standard regulatory boilerplate: Amazon needs power for a massive data center planned for Falls Township, Pennsylvania, and this deal outlines how they’ll pay for the necessary grid upgrades. But if you peel back the layers, especially when viewed against the backdrop of an impending 6% rate hike for PECO customers, you start to see the kind of structural discrepancies that keep an analyst like me up at night.
The Approval, The Presumption, and the Unasked Questions
FERC’s decision, delivered on a Friday, invoked the venerable Mobile-Sierra presumption. For those unfamiliar, this doctrine essentially states that freely negotiated contracts between independent parties are presumed to be "just and reasonable" unless they demonstrably cause serious public harm. It’s a legal shortcut, a regulatory nod to the idea that sophisticated players can look after themselves. And, by extension, that their agreements will somehow cascade into public benefit. PECO’s September application even claimed the agreement includes provisions designed to protect utility customers from costs, even if the data center complex never fully materializes. Sounds reassuring, doesn't it?
But here’s where the narrative starts to fray. FERC explicitly rejected a plea from PJM Interconnection’s market monitor, Monitoring Analytics, to actually assess how this colossal data center could impact capacity and energy costs for ratepayers, or indeed, overall grid reliability. The commission’s rationale? Those issues were "outside the scope of the proceeding." It’s like approving a new highway on-ramp without asking how it’ll affect rush hour traffic. The immediate transaction might be clean, but the systemic ripple effects are conveniently ignored.
This is precisely the kind of narrow jurisdictional focus that allows significant risks to accumulate. Commissioner Judy Chang, while ultimately voting to approve, issued a concurring statement that, frankly, reads like a red flag to anyone paying attention to the numbers. She didn't mince words, warning that the agreement raises "significant questions" about future customer protections. Chang correctly pointed out that while the Mobile-Sierra presumption is useful for sophisticated parties, applying it uncritically to private entities creating agreements that affect public ratepayers isn't necessarily in the public's best interest. She articulated a critical methodological critique: how can we presume "just and reasonable" when the full scope of public impact isn't even considered? The agency, she stressed, "lacks a framework for assessing those protections," despite states grappling with over 60 similar large load tariffs. This isn't just a procedural quibble; it's a gaping hole in oversight.
The Looming Bill and the Unseen Hand
Now, let’s pivot to something far more tangible for the average Pennsylvanian: the electricity bill. Just days after FERC’s decision, the Pennsylvania Public Utility Commission announced that PECO electricity supply rates are set to increase by 6% on December 1, 2025—to be more exact, from 10.4 cents per kilowatt-hour to 11.024 cents. This isn't a small adjustment; it’s a direct hit to household budgets. PECO, PPL electricity supply rates are set to increase on December 1
PECO, in their statement, attributed this hike to "multiple factors," primarily sharp increases in wholesale market prices and the PJM capacity auction. They cited "anticipated challenges with availability of resources to meet rising demand and decreased supply due to power plant retirements." Capacity prices, they explained, act as a "type of insurance for grid reliability under changing circumstances, including increases in demand and extreme weather conditions."
And this is the part of the report that I find genuinely puzzling. On one hand, FERC approves a massive new load—a data center that will consume significant power—under an agreement that purportedly protects customers, but without actually assessing its broader impact on capacity and costs. On the other hand, PECO is telling its customers that rates are going up because of "rising demand" and "resource challenges." It doesn’t take a forensic accountant to see the potential for a disconnect here. How can we, as ratepayers, be assured that the "provisions designed to protect utility customers from costs" in the Amazon deal are truly robust enough to counteract the very "rising demand" that PECO is citing for its rate hike? It feels like we're being told two different stories, and the one that involves us paying more seems to be winning.
The fundamental question that remains unanswered, and one that FERC side-stepped, is this: What is the true, comprehensive cost of integrating these massive new loads onto an already strained grid, and who ultimately bears that cost? If the regulatory bodies aren't asking that question upfront, with a robust framework, then the answer will inevitably be found in the rate increases that hit everyone's monthly statements. It’s a classic shell game, isn't it? The cost gets passed around until it lands squarely in the lap of the residential customer, who has precious few options to push back.
The Unexamined Burden on the Grid
The approval of the PECO-Amazon agreement, particularly in light of Commissioner Chang's dissent, highlights a growing vulnerability in our energy infrastructure planning. We have a fragmented regulatory landscape where FERC looks at wholesale rates and states handle retail, yet these bilateral transmission agreements fall into a gray area, creating what Chang called "jurisdictional 'silos' or 'loopholes'." It’s like trying to manage a household budget by having one person oversee income and another oversee expenses, but no one is looking at the overall balance sheet. The net effect is often an unexpected deficit.
This isn't just about a single data center; it’s a systemic issue. As more "large load additions" — be they data centers, EV charging hubs, or new industrial facilities — come online, the pressure on the grid intensifies. Each one requires significant transmission upgrades, and without a transparent, comprehensive framework for assessing their cumulative impact on capacity, reliability, and most importantly, ratepayer costs, we are essentially flying blind. PECO’s statement about "building and preserving baseload electric generation capacity" suggests they see the problem, but the regulatory mechanisms aren't quite aligned to solve it holistically. The current approach seems to rely on an optimistic assumption that individual agreements, however opaque, will somehow coalesce into a fair outcome for everyone. The 6% rate hike, however, suggests that optimism might be misplaced.