New Abiguity in the “Full Retail Rate” Discussion

Written by Matthew T. Finnegan

On March 13^th, 2026, the Pennsylvania Commonwealth Court affirmed a decision by the Pennsylvania Public Utility Commission (PUC) regarding UGI Utilities, Inc. – Electric Division’s (UGI) proposed Default Service Plan (DSP). UGI must file a new DSP every few years. It explains how the utility plans to manage their electricity supply, including how they bill their customers. The most recent DSP, DSP V, set out to alter the classifications of customers, including those who both use and generate electricity, the customer-generators.

The DSP V introduces the use of a new metric in classifying customer-generators called System Peak Load Impact (SPLI). The SPLI examines a customer’s overall impact on the whole system, not just the peak usage that was used under the previous DSP, DSP IV. Using the SPLI, customers with values over 100kW will be reclassified into the GSR-2 group, which pays hourly spot market rates which may have fluctuation and potential unpredictability in billing.

When the DSP V was filed, Penn Renewables, LLC., raised concerns as to its legality, raising four points that the Court addressed. First, that the DSP V violated the AEPS ACT by using the GSR-2 rate and therefore failing to compensate customer-generators at the full retail value for the electricity they generate. Second, that the use of hourly default service rates is in violation of the Competition Act. Third, that the GSR-2, as approved, unlawfully discriminates against customer-generators. Lastly, that the approval of the GSR-2 and the SPLI metric was arbitrary, capricious, and contrary to the goals of the AEPS Act’s goals.

The Court rejected all of these arguments, affirming the PUC’s decision. In doing so though, the court relied on interesting, and arguably novel, determinations regarding what “full retail rate” means. The AEPS Act requires that “excess generation from net-metered customer-generators shall receive full retail value for all energy produced on an annual basis”. 73 P.S. 1648.5. However, “full retail value” is not defined. The General Assembly did not define the term in the statute and even granted broad rule-making authority to the Commission regarding net-metering and customer-generators. The Court, relying on these facts, decided that the Commission has the authority to determine what constitutes “full retail rate”.

Through approving the DSP V, the Court determined that the PUC was simply defining “full retail rate” in the way they deemed fit, through the authority mentioned above. However, there has been a common understanding that the retail rate and the wholesale rate are distinct. Within the new definition of “full retail rate”, as determined by the Court, “is the ‘real-time Locational Marginal Price [i.e., the wholesale electricity price] during each hour of the billing month’; capacity and transmission costs; administrative and legal costs; taxes;  various  net  metering  costs; ‘and  any  other  applicable costs  of  providing default service for the GSR-2 group.’” Penn Renewables, LLC. V PA PUC (citing UGI’s Electrical Service Tariff, Rider B at 3.).

Including the wholesale rate as piece of the “full retail rate” has immediately shaken the understanding of net-metering compensation that has been held for years. The wholesale rate is the price that suppliers pay to purchase electricity from the grid. The retail rate is the price that individuals pay, usually through their electric bill. The retail rate is generally higher as it accounts for markups to cover administrative costs and profit seeking.

Being paid for excess energy at the retail rate, which net-metering customers within UGI territory have been used to for years, is financially the best option. The court has now stated that the wholesale rate, a far lower rate, can be used as the basis for paying the “full retail rate”, lowering the payments amounts that these customers receive. This directly hurts current users and greatly impacts the financials of projects currently under developed, while standing on questionable legal ground.  

To our clients and other customer-generators all around the state, this decision has a direct impact on the funds they receive from net-metering. The economics required for ensuring solar systems pass are financially viable revolve around the ability to predict the income they will generate through excess generation. When this is not an option, when the rate is unpredictable and can fluctuate, these system are significantly less likely to get built.

MPL Law is dedicated to helping our client’s work through these complex and ever-changing laws and regulations. Our attorneys and staff are constantly working to ensure we have the most up to date information for our clients. Reach out now.