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On July 31, 2026 Pennsylvania PUC Administrative Law Judges (ALJs) issued a recommended decision in UGI Utilities rate case in face of Governor Shapario’s filed comments opposing the proposed settlement of UGI agreed upon settlement.

As reported previously, parties supporting the settlement include, the PUC’s Bureau of Investigation and Enforcement, the Pennsylvania Office of Consumer Advocate, and the Pennsylvania Office of Small Business Advocate, with the Coalition for Affordable Utility Services and Energy Efficiency not opposing the settlement.

The ALJ’s recommended decision concludes that, “the Settlement here is a “black box” settlement. That is, the Settling Parties have agreed to an overall revenue requirement without agreeing to each and every adjustment of the components of the rate filing. The Commission has historically permitted the use of “black box” settlements as a means of promoting settlement among the parties in contentious base rate proceedings. “Black box” settlements of rate cases save a significant amount of time and expense for customers, companies, and the Commission and often results in alternatives that may not have been realized during the litigation process. Determining a company’s revenue requirement is a calculation involving many complex and interrelated adjustments that affect expenses, depreciation, rate base, taxes and the company’s cost of capital. Reaching an agreement between various parties on each component of a rate increase can be difficult and impractical in many cases.”

“The Commission has also stated: Despite the policy favoring settlements, the Commission does not simply rubber stamp settlements without further inquiry. In order to accept a settlement such as those proposed here, the Commission must determine that the proposed terms and conditions are in the public interest. The focus of the inquiry for determining whether a proposed settlement should be approved by the Commission is whether the proposed terms and conditions foster, promote and serve the public interest. Because the Joint Petitioners request the Commission enter an order in this proceeding approving the Partial Settlement without modification, they share the burden of proof to show that the terms and conditions of the Partial Settlement are in the public interest.

“The Joint Petitioners in this proceeding represent many interests. To reach a settlement of all issues with the aforementioned parties in such a base rate case is unusual. It represents hours of negotiation and a great deal of cooperation. Because all of the diverse interests represented by the Joint Petitioners have been satisfied, the Settlement benefits UGI’s customers. It saves the parties and the Commission the time and expense of fully litigating this matter. The parties have avoided the need to prepare briefs, reply briefs, exceptions, replies to exceptions and possible appellate litigation. UGI’s customers benefit from this cost savings. The Joint Petition for Approval of Settlement of All Issues was served on all non-signatory parties to this base rate case. Objections to the proposed Settlement were to have been filed on or before July 15, 2026. No objections or comments were filed.

Upon due consideration of the terms and conditions of the Joint Petition for Approval of Settlement of All Issues, including the Statements in Support of the Joint Petitioners, this Settlement constitutes a fair, just and reasonable resolution of the Commission’s investigation. Therefore, the Joint Petition for Approval of Settlement of All Issues is in the public interest and should be approved.”

The Revenue Requirement, Revenue Allocation and Rate Design agreed to by the Joint Petitioners in the Settlement are all within the range of likely outcomes should this matter have been fully litigated by the Joint Petitioners. The Joint Petitioners all agree that the Settlement and all of its terms are within the public interest and satisfy their concerns. The Joint Petitioners each filed Statements in Support which accompanied the Settlement stating as much. When the statutory advocates fully support a settlement, it is strong evidence that the terms and conditions are just and reasonable and in the public interest.

Notably, through approval of the Settlement, UGI customers will be subject to a rate increase that is less than what was initially proposed. The phase-in of the rates over two phases benefits UGI customers by mitigating the impact that the rate increase will have on the customers by spreading out the increase over time. UGI’s agreement through the Settlement to not file for another base rate increase until January 2029 provides its customers with a stability in rates for at least the next few years.”

“We find the Settlement is a reasonable balance of the competing needs of the stakeholders subject to the ratemaking process: residential consumers – both those who struggle to pay their bills and those who struggle less – and small businesses, large industrial customers, and the utility investors. We agree with the Joint Petitioners that the Settlement exemplifies the benefits to be derived from a negotiated approach to resolving what can appear at first glance to be irreconcilable regulatory differences. Therefore, we recommend that the Commission approve the Joint Petition for Approval of Settlement of All Issues without modification because the Settlement is in the public interest.”

As noted above Governor Josh Shapiro filed comments opposing the proposed settlement of UGI utilities gas base rate case.

“Governor Josh Shapiro respectfully submits these comments in opposition to the “black box” settlement proposed in this matter by UGI Utilities—Gas Division (“UGI Gas”) and several other parties. The Governor opposes the proposed settlement because it is inconsistent with principles that the Governor has articulated as a fair barometer of whether utility rate proposals would result in excessive costs for Pennsylvania customers. Governor Shapiro urges the Public Utility Commission to modify the proposed settlement by: (1) establishing as UGI Gas’s return on equity (“ROE”) the lowest ROE supported by the record, and (2) imputing to UGI Gas either a capital structure that is the same as that of the company’s parent, or the lowest-equity capital structure supported by the record.”

“First, the settlement does not demonstrate that UGI Gas will raise capital in the most cost-effective form available. Relatively low-cost debt—not high-cost equity—should normally represent a clear majority of a utility’s proposed ratemaking capital structure. Moreover, when a distribution utility is owned by a holding company, its equity share should be no greater than its parent’s, absent extraordinary justification. Otherwise, lower-cost debt benefits shareholders while higher-cost equity burdens ratepayers.”

“Second, the proposed settlement does not provide adequate assurance that the investments that UGI Gas will recover through base rates are necessary and cost-effective. When a utility proposes to increase its rates, it must use transparent data to show that the investments will address specific reliability or safety concerns or provide cost/benefit analysis that demonstrates significant customer savings or reliability benefits. Among other things, this means showing that customers will receive real net value from utility investments, and that the utility is controlling costs and maximizing the use of existing resources in customers’ interest.”

“Third, although the proposed settlement would result in a smaller rate increase than UGI Gas proposed, it would likely still award UGI an unjustifiably high return on equity (“ROE”). In its application, UGI Gas proposed to increase its ROE to an exorbitant 10.75 percent. Since the proposed settlement is a “black box” settlement, it does not include an agreed-to ROE. However, CAUSE-PA has estimated that it would result in an actual ROE of 9.7 percent, “assuming the Company’s proposed capital structure, and all other things being equal.”

“Finally, the agreed-to rate increase in the proposed settlement is also troubling because UGI Gas filed its request to increase base rates just five months after settling its previous base rate case in Docket No. R-2024-3052716. UGI Gas evidently concluded that it settled the previous case for less revenue than it needed; however, the company’s application did not acknowledge this fact, and the settlement does not explain why customers, rather than the company, should bear the consequences of this miscalculation.”