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What we have seen over the last couple of years within PJM is a mismatch with low demand and generation supply. The price of electricity, including the customers that we serve in Pennsylvania, are increasing. Data centers and huge cities, but there's also these 1.3 million residential customers of PPL.
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When you have these very large customers, hyperscalers, data centers, they're paying a proportionately much larger part of that system. So the costs for everyone else ultimately go down. A lot of it just comes down to how you're telling this story to your customers. We need to be a consistent, transparent voice for our communities. Having to create structure and guidelines where they didn't exist.
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Hey there, and welcome back to Power Perspectives. I'm Kinsey Grant Baker. So these days, so much of the conversation at utilities centers on one big theme, affordability. Bet you probably could have guessed that. How can utilities ensure that their customers aren't the ones left buckling under the pressure of an increasingly complex grid? How can they ensure equitable access to power, whether you're a hyperscaler powering a data center or a kindergarten teacher powering your EV?
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How are utilities making the right kind of impact? One way is through economic development, by joining forces with local communities to enrich economies regardless of utility bill trends. Could it be a win-win? That's what we're going to try and find out today. Today, we are exploring how utilities can leverage partnerships to support business growth and community investment across their service territories with Christine Martin, president of PPL Electric Utilities. Christine, welcome to Power Perspectives. How are you today?
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Thank you, Kinsey. I'm doing great. Glad to be here. Glad to have you here. We've got a great conversation lined up. I'm excited to hear a little bit more about the work that you're doing and how it impacts communities. I think to start, though, it would be great to just hear a little bit more about PPL. Tell me a little bit about the customers you serve, maybe the area, the geography you cover, and maybe what your role, too, as president entails.
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Sure. Glad to do that. So PPL Electric Utilities is the delivery company for 1.5 million Pennsylvanians. We are a transmission and distribution company. So we own and operate assets across 29 counties in Pennsylvania. So it's primarily northeast, central, and heading into the southwest.
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some of the southeastern part of the state. So our customers are about 1.3 million are residential customers. The rest are made up of our small commercial, large commercial, and industrial customers. So as president of the company, my job is really to keep our workforce on more than 1400 hardworking Pennsylvanians focused on reliability, resiliency,
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Safety, customer service, making sure that our customers have the electricity they need when they expect it. No one wants to think about electricity, right? It needs to be there 24-7, powering the lives of our customers. And that's something that we take very, very seriously. So our system, I like to say, is enough to circle the earth.
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Twice. So it's a pretty large system, about 50,000 miles of transmission and distribution lines. So we go through a lot of different terrain, valleys, mountains, large land areas and forested areas across our 29 counties. It's a very diverse, both city and rural, service territory.
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It's interesting to hear some of the context of the work that you're doing, the work that you and your team are doing. And to circle the earth twice is pretty considerable. What I also think is interesting in there that you mentioned 1.3 million of your 1.5 million customers are residential. Yeah.
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A lot of times it seems like this conversation around affordability is really centered on the concerns of those residential customers. I'd love to hear a little bit more about what is making affordability such a big conversation for those customers and for people in Pennsylvania and, you know, candidly across the country too. When we're looking at affordability as a big picture conversation for utilities, can we, you know, be able to do that?
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Tell me a little bit about what might actually be driving utility bills higher, electricity bills higher in Pennsylvania in your service territory. And importantly, how much of that you as PPL can control? It's a great question, Kinsey, and it's really top of mind for all of our customers. And as you said, primarily our residential customers are very focused on it. It's, you know, electricity prices have become really low.
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a kitchen table issue for our customers. And it's something that, look, even before the price increases we've seen over the last couple of years, affordability has always been front in mind for PPL electric utilities. The way that we have operated, the way that we have invested in our system is always to get the most out of the investments we've made, to have a very incremental approach to bill increases for our customers. I mean, for example,
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Our company has just come through our first distribution base rate increase in 10 years. So we did that by operating efficiently, by making smart investments in our system to drive costs out of our system while maintaining or improving reliability and resiliency for our customers. So it starts first as a utility in controlling what we can. So for us, that is our transmission costs, our distribution costs.
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Unfortunately, what we have seen over the last couple of years within PJM, which is the region in which PPL Electric Utilities operates, is a mismatch with demand, low demand and generation supply. And in some ways, this is really a future mismatch because the PJM market is looking to meet current and future demand.
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demands for energy. And so we have historic growth in PJM, certainly in Pennsylvania and in our service territory, like we have never seen before. We will be more than doubling the system peak that it took us 100 years to get to. And so just like simple economics that we all
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When demand exceeds supply, prices go up. And so those are the signals that the market is sending to private generation owners. PPL Electric Utilities does not own or operate generation. We're precluded from doing so under state law. So it's sending those price signals to those generators to build.
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They have not yet responded to those price signals. So the price of electricity for everyone in PJM, including the customers that we serve in Pennsylvania, are increasing. What that means for an average residential customer is that they are paying about $23 more for the generation component on their build than $23.
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than about two years ago. So it's a really significant increase. And certainly our customers are concerned about it. We're concerned about it as well. So again, we're controlling the cost that we can control. But more than half of the bill or about half of the bill is supply, generation supply, and about 8 percent
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estate taxes and mandated mandates. So that that that piece in the middle is us. Right. So it's not the biggest component of the bill. You know, to your point about controlling what you can control, this is a as much as we have, you know, a universal takeaway in utilities is something that I think so many of the people in leadership positions like you are thinking about right now. What can we control and what can't we control?
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With regards specifically to PJM and that mismatch you mentioned, I think it's timely that we're having this conversation, we're recording this conversation right as the capacity auction is kicking off for PJM. But with it in mind that PJM is the largest grid operator in the United States, how does that impact the way that...
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you are sort of at the behest of decisions that are made at PJM as part of that large, very large service territory. When we're looking at an RTO like PJM and they have data centers and huge cities and all of that, but there's also these 1.3 million residential customers of PPL. How do those two things factor into one another when you're looking at just the
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the PJM footprint is with, you know, where you sit in leadership at PPL. Tell me a little bit about what that tension looks like or feels like.
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Yeah, well, I think, again, you know, policymakers are rightfully concerned and unsettled about the cost increases. We certainly see that coming our way in terms of, you know, policymakers, the governor focusing on utilities and our earnings and how we can control our costs while still meeting reliability and resiliency costs.
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standards that we have in place. And look, we're happy to have that conversation. It needs to be fair and reasonable, though. Again, a large portion of the bill is not what we control. So
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While we should be expected to be efficient and deliver value for our customers, we're also a regulated entity. There is nothing that we do that is not reviewed by a federal regulator or a state regulator
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when we go in for something like a rate proceeding, it is an open book. It is exhibit after exhibit, financial statements, performance for multiple years. And in all of that is continued reporting and
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statutory obligations. So regulated utilities, you know, the regulated piece of it is no joke, right? We really are under a microscope, but we take that responsibility very seriously. Our customers don't have a choice but to get electricity delivered from us. And so in that regulatory compact, in exchange for that kind of that regulated rate of return, and that captive customer base,
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we have an obligation to deliver safe, reliable, affordable, or reasonably priced electricity. Now, on the generation and the supply side, your question about PJM, I want to talk a little bit about large load and what we've done to try to protect our customers, again, at least from the cost that we control on our transmission system.
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So in the rate case that I mentioned that we just came through, we are the first utility in Pennsylvania with a large load tariff. And we also created a new rate class for these very large load customers because they really don't look like our typical industrial or large commercial and industrial customers. So by creating a new rate class, that gives us flexibility with cost allocation and putting costs where they need to be.
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That concept that you may have heard people talking about growth paying for growth. That really is really the root of that is making sure that cost allocation is correct. So that large low tariff and that new rate class protects our other customers from any inappropriate cost shifting of our transmission, our transmission costs, the cost to build out and maintain that transmission system.
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Just sticking kind of with transmission, the other side of the large load growth and broader economic growth that we're seeing is really downward, ultimately downward price pressure, at least on the transmission side for our customers. So think about the transmission system and the distribution system as highways.
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It's existing infrastructure. It needs to be upgraded, maintained. But the more users paying for that infrastructure, the lower the cost for everyone. With electricity cost allocation, the more volume...
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you consume on the system, the more you pay. So when you have these very large customers, hyperscalers, data centers, connecting into our transmission system and ramping up their usage to as much as 1,000 megawatts, that's a huge amount of demand. They're paying a proportionately much larger part of that system.
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That fixed asset. So the costs for everyone else ultimately go down. So that is a benefit that we talk about. It's economic, the benefit of economic growth, whether it's just the distribution system or the transmission system, is you have a robust asset that these large users are paying a larger proportion of.
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First of all, wonderful context to really frame this conversation around affordability that truly is centered on the changing nature of the load in the United States, of demand in the United States. I know you've been pretty specific, too, about the math. PPL has said that the first gigawatt of new large load added is...
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is expected to reduce the transmission portion of a typical residential bill by around 10% additional savings as more load comes onto the system. When you're looking at that as a real potential benefit for residential customers, framing that with the reality that a large load tariff, a new rate class for large loads specifically, how do you balance
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incentivizing those large loads to build where you are while also ensuring that you can prioritize affordability for residential customers.
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So really for PPL Electric Utilities, the big incentive for these large load customers to be on our system is the capacity and resiliency of the system that we've built and invested in over decades.
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which has created a transmission system for the benefit of all of our customers that can accommodate this additional load. So it's not necessarily a direct financial benefit that we're providing to these large load customers. They're paying their way. They are paying for upgrades that directly serve them.
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They are making financial and load commitments that essentially cover the entire cost of both what we are upgrading for them, but also what ultimately is socialized across the rest of our customers. So what it means is that all of our customers will be made all-in.
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and will not be left holding costs for that large load if, for example, they don't use as much electricity as they've committed to use, or if they leave our system early, they're not going to be able to use
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They're paying exit fees, again, to make everybody else whole. So there's really a, in that respect, from a cost allocation standpoint, it's neutral, right? We're making sure that our customers are whole. The benefit in terms of paying for the system is when that load starts to come into our system and these transmission customers are paying for all of that volume.
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So we're not, as a company, providing them with an incentive, right? So it's really kind of making sure that the rest of the customers are either seeing a benefit or are not being harmed. Now, the state itself has provided some financial benefits, taxation benefits for data center customers to attract them to the state. They did that a number of years ago.
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It's not really unlike other economic benefits they've had for manufacturing customers or others over the years. So it's the tools that the state can use for economic development. Where we sit is making sure that we've got the infrastructure in place.
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that can attract businesses to the state. And that is really where I think KPL Electric Utilities has distinguished itself as a really good partner for our state in attracting economic growth to that 29-county service territory.
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Yeah, it makes a lot of sense. And I think there's there's an element of this conversation, too, where a lot of it just comes down to how you're telling this story to your customers. You mentioned as a regulated utility, it's not like your customers have a choice really to go somewhere else, you know, especially when we're talking about the residential customers.
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how do you communicate to them when we see so much, you know, nimbyism and I don't want a data center. And these are, you know, customer advocacy groups that are really working hard to make these things not join the grid or not be built. Right. How do you communicate the efforts that you're putting in here to the sort of everyday people who might be concerned about affordability or might be concerned about the bill that they're getting in the mail each month? What does that storytelling look like for PPL? Yeah.
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Well, first of all, it needs to be early and often, right? And as early as we can get to our communities and maintaining that consistent presence that we've had for more than 100 years in Pennsylvania really helps. If development is getting ahead of us, so to speak, or a narrative is getting ahead of us, it's really hard to catch up with that.
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So we maintain a consistent presence in our communities, both from a financial community support standpoint, through our foundation, through our charitable giving, also through our employee base. We have thousands of hours of volunteering in our communities. We are on local boards, nonprofits, economic development organizations.
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We have employees whose direct job it is to be in the regions and to be community partners in the regions. And then through our communications, right, it's really different, consistent, but different messages depending on the audience.
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A lot of what we've been doing right now, Kinsey, is some myth-busting around data centers and development. As you can imagine, folks are nervous, right? AI makes people nervous. Then they hear about environmental issues or land use issues. And we get all that. And...
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I think in the first instance, we don't discount that level of concern, but we come to the table with a credible and transparent voice for our communities. I think they're looking to us, not I think, I know they're looking to us to play probably an even bigger role than we normally would with a new customer because of the type of customer it is. I will tell you early on,
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we were treating this development more of kind of our normal type of development and transmission planning and siting, we've now really leaned into understanding that we need to be a consistent and transparent voice for our communities. So not only are we talking and partnering with our local officials, economic development agencies, organizations.
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influential folks in the communities and our everyday residents. But we're also working a lot more with those customers at the outset to help them understand how they need to show up in the communities. So we are used to, as an infrastructure company and a regulated utility, having public open houses and communicating about what we're doing. Not every developer or customer understands that that is a level of expectation that these communities have.
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Where developers or hyperscalers have been out early and transparently and talked very clearly about community benefits and potential impacts and how they would mitigate those, we've seen communities respond really well to that.
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Where they haven't, it's been more challenging. And so, look, we know this growth is good for our state. It needs to be done responsibly, both from a cost allocation standpoint, a siting standpoint, a how you live and work in a community. And so we've really leaned in a lot more with our customers and trying to get that set out on the right foot.
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Yeah, it's interesting to hear all about this. I think that it, to me, brings up this question of what the ultimate impact is. You know, when you're talking about partnerships and economic development that PPL Electric Utilities is really, you know, trying to take a leadership position on, whether that's
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consulting and advising for these large load customers, joining foundations, charitable giving, some of the examples you mentioned here. When we're looking at the ultimate impact of work like that, of partnerships like that, is it to improve the storytelling? Is it to help customers to really understand what's going on with their utility? Or does it actually, you know, keep their bills lower? What is sort of the ultimate outcome that you're working toward when you're facilitating these kinds of partnerships?
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what is the benefit to our communities? What is the benefit to our customers? So we know that economic growth, irrespective of taking it away just from large load customers, but economic growth,
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is good for the health and stability of our communities. It helps to manage costs of infrastructure, ours and others. It helps folks have those family-sustaining jobs.
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that they need in their communities. There are benefits to education. Our community college system is really, has really leaned into the technology and jobs needed for this digital economy or the types of jobs that we need to build and maintain our infrastructure. So look, we've lived and worked. I'm a customer. I'm my own customer, right? I live in my service territory.
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I can look at our over 1,000, 1,400 customers or 1,400 employees and say the same thing. They are the neighbors, the employees, the customers. So we have a vested interest in making sure that we have vibrant, healthy, sustainable communities. So it starts there. We're not going anywhere. We have to live and work in these communities as well. So it starts there and then moves to the pieces that you talked about.
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is education and transparency and helping people understand, you know, who wants to locate in their backyard, the type of work that we're doing and why it's important and how it benefits them. And again, working with our customers, I think in a little more focused way to help them understand the communities that they're entering,
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And really what our expectations are as well as the utilities serving them and living and working in those communities and having to build infrastructure to serve them. Right. We want the entire project to to go well. It's it's nobody's interest really to be kind of to be fighting and having these kind of apremonious relationships. So that is really where we start is kind of the the health and sustainability of our communities.
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And then really, how can we do our job in the best way possible, which is delivering reliable, affordable, safe and sustainable electricity? That ultimately is PPL Electric Utilities' job at the end of the day for all of our customers, whether you are a hyperscaler, a farmer, a small business owner or a homeowner. So we've got to balance all of those interests.
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Yeah. And balancing all those interests, I imagine, is not a very simple job. You know, over the last several years of this effort toward economic development and investing in the community, at the same time as the demand reality has truly shifted in the United States across the country, what have been some of your biggest learnings? You know, if you were to tell another utility leader what you've walked away with in terms of lessons learned, I would love to hear what that looks like.
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Yeah. I mean, I think the first I mentioned kind of early and often on communication. Look, I think that is, it's not, it can never be too early and can never be too often. Right. So I think kind of not taking that for granted. Sometimes we can get into our own utility bubbles and sometimes even kind of with our state partners, kind of we're operating in this place that we know the rules, we know
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We know the end game, right? You've got to make sure that folks that are impacted are joining you at the beginning and carrying through. And so like township supervisors and local officials have been really at the center of a lot of this growth in our communities.
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And so, look, if I had to do something differently as a company, it would have been engaging them directly a lot earlier and helping them with kind of tools and knowledge that they would that they would need to.
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I don't think anyone could have possibly anticipated the amount of growth that we're seeing and the level of activity. It came really fast. I think we caught up. We collectively caught up really quickly, Kinsey.
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But again, you know, hindsight's 20-20. So that would be one of those things is perhaps not to take for granted that everyone understands the business that we're in and what this growth looks like and why it's important. You've got to really, you know, you've got to really, I mentioned electricity has become, you know, a kitchen table issue. You've got to take it down to the kitchen table really at the outset. So I think that's a lesson learned. Yeah.
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Reputation and transparency and credibility. Those are three words that we can live and die by as a regulated utility. And again, not taking that for granted and making sure that we are protecting that at all costs because it's
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It enables us to do the important work that we're doing. But leaning in with customers like we've never leaned in or had to lean in before and making sure that they understand that and have a show up in communities in which we're working would be another lesson learned, I think, is really kind of.
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We need to respect our role and responsibilities as a utility. But kind of going out of that a little bit, maybe to help our customers and our communities, is something that we've really leaned into. And so that would be kind of another lesson learned is that early and often communication, kind of working with the customers and not taking for granted that everyone knows kind of what's in it for them at the end.
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Yeah, yeah, makes a lot of sense. I think it also tees up an interesting question about how how that might change. You know, when we look ahead, how do you think the conversation about a utilities role and maybe even specifically a regulated utilities role in a local community could shift in the coming years as the reality of working in utilities shifts? Tell me a little bit more about your vision of what community involvement, what, you know, community engagement looks like for utilities as we move forward. Yeah.
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We need to think about it in a much more expansive standpoint. Now, taking a step back, I mean, PP Electric Utilities has always been extremely present and involved with our communities and with our regulators, with our policymakers.
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It's not that we haven't been doing something that we now need to do. I think it's more of where we're showing up. So maybe in the past we weren't as active in planning commission conversations or some of those local conversations where
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around ordinances and kind of how folks are planning their communities. They're wanting to hear from us now because they have questions for us. And so I think we're probably going to be showing up more in those kinds of conversations, representing the infrastructure that we provide and talking about things like how we allocate cost.
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how we upgrade infrastructure, all of those types of things, probably at a little bit different level of detail than maybe we've had to do in the past. And that's fine. Again, that's that's transparency and credibility. I'd rather they ask us because we have the answers to provide to them. So I think it's really around, I think, some of those details that maybe folks weren't paying as much attention to in the past.
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We were, but I think that the development and interest is just at such a scale that in particular local officials, planning commissions just need to educate themselves a little bit more on what this all means. And so we want to make sure that we're a partner in doing that with them.
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Just the other thing I would just mention is on kind of the regulatory piece and making sure that I mentioned our large load tariff, for example, making sure that we've got the structure, the regulatory structure, the cost allocation, in some respects, perhaps legislative initiatives in the future that enable us to accommodate this kind of
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growth to accommodate what is happening in PJM right now with a reliability backstop auction where they are looking to match new generation with large load, which is something that absolutely we support, but making sure that all of those federal, regional, federal, and state rules down to our utility align so that we can accommodate growth, but with the appropriate garb rails for all the rest of our customers.
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Yeah, that alignment is a really crucial part of this conversation across so many entities, so many different moving parts. Do you have any advice for utility leaders who might want to forge those kinds of critical partnerships? What would you say has been most important or has been most impactful for you as you have been trying to create those kinds of partnerships that really make an impact?
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So I think for us, it's really, I mean, we were pretty early in how we were designing our electric service agreements, how we were engaging with these large load customers, our regulators and PJM as our regional transmission organization. So we were having to create structure and guidelines where they didn't exist.
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So I would say leaning into those, if they don't exist, you've got to create them. You don't do that in a vacuum, right? You do it with appropriate stakeholder input. But I guess probably one of my pieces of advice is maybe don't always, can't always wait.
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Because these things are upon you. And again, we have an obligation to serve. We want to serve load and those that want to interconnect into our system. So sometimes that means you've got to lean in and create some of that structure. And so we had a regulatory timing, again, with our distribution rate case where we were able to put this retail tariff in place.
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But we've been in regular communications and forums with policymakers, regulators, customers to help develop these. But you can't always wait for them to be developed because this world, this economy is moving much, much faster these days. And so as regulated utilities, sometimes we've got to start designing what those rules should look like and then getting the appropriate stakeholders in place.
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Yeah, not always enough to just keep up, right? You gotta be proactive. So Christine, this has been such a wonderful conversation to hear more about the work that you're doing, the work that you and your team are doing. I really, really appreciate you taking the time to tell me more about what all of that looks like and what your advice for utilities as we move into a continued uncharted territory, what that advice looks like. So thank you so much for joining me today on Power Perspectives.
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Thanks, Kinsey. My pleasure. Thank you, as always, to all of you as well for tuning into another episode. I'm Kinsey Grant Baker, and I will see you next time.
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What we have seen over the last couple of years within PJM is a mismatch with low demand and generation supply. The price of electricity, including the customers that we serve in Pennsylvania, are increasing. Data centers and huge cities, but there's also these 1.3 million residential customers of PPL.
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When you have these very large customers, hyperscalers, data centers, they're paying a proportionately much larger part of that system. So the costs for everyone else ultimately go down. A lot of it just comes down to how you're telling this story to your customers. We need to be a consistent, transparent voice for our communities. Having to create structure and guidelines where they didn't exist.
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Hey there, and welcome back to Power Perspectives. I'm Kinsey Grant Baker. So these days, so much of the conversation at utilities centers on one big theme, affordability. Bet you probably could have guessed that. How can utilities ensure that their customers aren't the ones left buckling under the pressure of an increasingly complex grid? How can they ensure equitable access to power, whether you're a hyperscaler powering a data center or a kindergarten teacher powering your EV?
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How are utilities making the right kind of impact? One way is through economic development, by joining forces with local communities to enrich economies regardless of utility bill trends. Could it be a win-win? That's what we're going to try and find out today. Today, we are exploring how utilities can leverage partnerships to support business growth and community investment across their service territories with Christine Martin, president of PPL Electric Utilities. Christine, welcome to Power Perspectives. How are you today?
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Thank you, Kinsey. I'm doing great. Glad to be here. Glad to have you here. We've got a great conversation lined up. I'm excited to hear a little bit more about the work that you're doing and how it impacts communities. I think to start, though, it would be great to just hear a little bit more about PPL. Tell me a little bit about the customers you serve, maybe the area, the geography you cover, and maybe what your role, too, as president entails.
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Sure. Glad to do that. So PPL Electric Utilities is the delivery company for 1.5 million Pennsylvanians. We are a transmission and distribution company. So we own and operate assets across 29 counties in Pennsylvania. So it's primarily northeast, central, and heading into the southwest.
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some of the southeastern part of the state. So our customers are about 1.3 million are residential customers. The rest are made up of our small commercial, large commercial, and industrial customers. So as president of the company, my job is really to keep our workforce on more than 1400 hardworking Pennsylvanians focused on reliability, resiliency,
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Safety, customer service, making sure that our customers have the electricity they need when they expect it. No one wants to think about electricity, right? It needs to be there 24-7, powering the lives of our customers. And that's something that we take very, very seriously. So our system, I like to say, is enough to circle the earth.
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Twice. So it's a pretty large system, about 50,000 miles of transmission and distribution lines. So we go through a lot of different terrain, valleys, mountains, large land areas and forested areas across our 29 counties. It's a very diverse, both city and rural, service territory.
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It's interesting to hear some of the context of the work that you're doing, the work that you and your team are doing. And to circle the earth twice is pretty considerable. What I also think is interesting in there that you mentioned 1.3 million of your 1.5 million customers are residential. Yeah.
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A lot of times it seems like this conversation around affordability is really centered on the concerns of those residential customers. I'd love to hear a little bit more about what is making affordability such a big conversation for those customers and for people in Pennsylvania and, you know, candidly across the country too. When we're looking at affordability as a big picture conversation for utilities, can we, you know, be able to do that?
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Tell me a little bit about what might actually be driving utility bills higher, electricity bills higher in Pennsylvania in your service territory. And importantly, how much of that you as PPL can control? It's a great question, Kinsey, and it's really top of mind for all of our customers. And as you said, primarily our residential customers are very focused on it. It's, you know, electricity prices have become really low.
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a kitchen table issue for our customers. And it's something that, look, even before the price increases we've seen over the last couple of years, affordability has always been front in mind for PPL electric utilities. The way that we have operated, the way that we have invested in our system is always to get the most out of the investments we've made, to have a very incremental approach to bill increases for our customers. I mean, for example,
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Our company has just come through our first distribution base rate increase in 10 years. So we did that by operating efficiently, by making smart investments in our system to drive costs out of our system while maintaining or improving reliability and resiliency for our customers. So it starts first as a utility in controlling what we can. So for us, that is our transmission costs, our distribution costs.
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Unfortunately, what we have seen over the last couple of years within PJM, which is the region in which PPL Electric Utilities operates, is a mismatch with demand, low demand and generation supply. And in some ways, this is really a future mismatch because the PJM market is looking to meet current and future demand.
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demands for energy. And so we have historic growth in PJM, certainly in Pennsylvania and in our service territory, like we have never seen before. We will be more than doubling the system peak that it took us 100 years to get to. And so just like simple economics that we all
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When demand exceeds supply, prices go up. And so those are the signals that the market is sending to private generation owners. PPL Electric Utilities does not own or operate generation. We're precluded from doing so under state law. So it's sending those price signals to those generators to build.
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They have not yet responded to those price signals. So the price of electricity for everyone in PJM, including the customers that we serve in Pennsylvania, are increasing. What that means for an average residential customer is that they are paying about $23 more for the generation component on their build than $23.
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than about two years ago. So it's a really significant increase. And certainly our customers are concerned about it. We're concerned about it as well. So again, we're controlling the cost that we can control. But more than half of the bill or about half of the bill is supply, generation supply, and about 8 percent
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estate taxes and mandated mandates. So that that that piece in the middle is us. Right. So it's not the biggest component of the bill. You know, to your point about controlling what you can control, this is a as much as we have, you know, a universal takeaway in utilities is something that I think so many of the people in leadership positions like you are thinking about right now. What can we control and what can't we control?
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With regards specifically to PJM and that mismatch you mentioned, I think it's timely that we're having this conversation, we're recording this conversation right as the capacity auction is kicking off for PJM. But with it in mind that PJM is the largest grid operator in the United States, how does that impact the way that...
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you are sort of at the behest of decisions that are made at PJM as part of that large, very large service territory. When we're looking at an RTO like PJM and they have data centers and huge cities and all of that, but there's also these 1.3 million residential customers of PPL. How do those two things factor into one another when you're looking at just the
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the PJM footprint is with, you know, where you sit in leadership at PPL. Tell me a little bit about what that tension looks like or feels like.
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Yeah, well, I think, again, you know, policymakers are rightfully concerned and unsettled about the cost increases. We certainly see that coming our way in terms of, you know, policymakers, the governor focusing on utilities and our earnings and how we can control our costs while still meeting reliability and resiliency costs.
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standards that we have in place. And look, we're happy to have that conversation. It needs to be fair and reasonable, though. Again, a large portion of the bill is not what we control. So
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While we should be expected to be efficient and deliver value for our customers, we're also a regulated entity. There is nothing that we do that is not reviewed by a federal regulator or a state regulator
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when we go in for something like a rate proceeding, it is an open book. It is exhibit after exhibit, financial statements, performance for multiple years. And in all of that is continued reporting and
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statutory obligations. So regulated utilities, you know, the regulated piece of it is no joke, right? We really are under a microscope, but we take that responsibility very seriously. Our customers don't have a choice but to get electricity delivered from us. And so in that regulatory compact, in exchange for that kind of that regulated rate of return, and that captive customer base,
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we have an obligation to deliver safe, reliable, affordable, or reasonably priced electricity. Now, on the generation and the supply side, your question about PJM, I want to talk a little bit about large load and what we've done to try to protect our customers, again, at least from the cost that we control on our transmission system.
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So in the rate case that I mentioned that we just came through, we are the first utility in Pennsylvania with a large load tariff. And we also created a new rate class for these very large load customers because they really don't look like our typical industrial or large commercial and industrial customers. So by creating a new rate class, that gives us flexibility with cost allocation and putting costs where they need to be.
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That concept that you may have heard people talking about growth paying for growth. That really is really the root of that is making sure that cost allocation is correct. So that large low tariff and that new rate class protects our other customers from any inappropriate cost shifting of our transmission, our transmission costs, the cost to build out and maintain that transmission system.
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Just sticking kind of with transmission, the other side of the large load growth and broader economic growth that we're seeing is really downward, ultimately downward price pressure, at least on the transmission side for our customers. So think about the transmission system and the distribution system as highways.
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It's existing infrastructure. It needs to be upgraded, maintained. But the more users paying for that infrastructure, the lower the cost for everyone. With electricity cost allocation, the more volume...
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you consume on the system, the more you pay. So when you have these very large customers, hyperscalers, data centers, connecting into our transmission system and ramping up their usage to as much as 1,000 megawatts, that's a huge amount of demand. They're paying a proportionately much larger part of that system.
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That fixed asset. So the costs for everyone else ultimately go down. So that is a benefit that we talk about. It's economic, the benefit of economic growth, whether it's just the distribution system or the transmission system, is you have a robust asset that these large users are paying a larger proportion of.
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First of all, wonderful context to really frame this conversation around affordability that truly is centered on the changing nature of the load in the United States, of demand in the United States. I know you've been pretty specific, too, about the math. PPL has said that the first gigawatt of new large load added is...
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is expected to reduce the transmission portion of a typical residential bill by around 10% additional savings as more load comes onto the system. When you're looking at that as a real potential benefit for residential customers, framing that with the reality that a large load tariff, a new rate class for large loads specifically, how do you balance
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incentivizing those large loads to build where you are while also ensuring that you can prioritize affordability for residential customers.
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So really for PPL Electric Utilities, the big incentive for these large load customers to be on our system is the capacity and resiliency of the system that we've built and invested in over decades.
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which has created a transmission system for the benefit of all of our customers that can accommodate this additional load. So it's not necessarily a direct financial benefit that we're providing to these large load customers. They're paying their way. They are paying for upgrades that directly serve them.
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They are making financial and load commitments that essentially cover the entire cost of both what we are upgrading for them, but also what ultimately is socialized across the rest of our customers. So what it means is that all of our customers will be made all-in.
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and will not be left holding costs for that large load if, for example, they don't use as much electricity as they've committed to use, or if they leave our system early, they're not going to be able to use
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They're paying exit fees, again, to make everybody else whole. So there's really a, in that respect, from a cost allocation standpoint, it's neutral, right? We're making sure that our customers are whole. The benefit in terms of paying for the system is when that load starts to come into our system and these transmission customers are paying for all of that volume.
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So we're not, as a company, providing them with an incentive, right? So it's really kind of making sure that the rest of the customers are either seeing a benefit or are not being harmed. Now, the state itself has provided some financial benefits, taxation benefits for data center customers to attract them to the state. They did that a number of years ago.
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It's not really unlike other economic benefits they've had for manufacturing customers or others over the years. So it's the tools that the state can use for economic development. Where we sit is making sure that we've got the infrastructure in place.
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that can attract businesses to the state. And that is really where I think KPL Electric Utilities has distinguished itself as a really good partner for our state in attracting economic growth to that 29-county service territory.
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Yeah, it makes a lot of sense. And I think there's there's an element of this conversation, too, where a lot of it just comes down to how you're telling this story to your customers. You mentioned as a regulated utility, it's not like your customers have a choice really to go somewhere else, you know, especially when we're talking about the residential customers.
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how do you communicate to them when we see so much, you know, nimbyism and I don't want a data center. And these are, you know, customer advocacy groups that are really working hard to make these things not join the grid or not be built. Right. How do you communicate the efforts that you're putting in here to the sort of everyday people who might be concerned about affordability or might be concerned about the bill that they're getting in the mail each month? What does that storytelling look like for PPL? Yeah.
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Well, first of all, it needs to be early and often, right? And as early as we can get to our communities and maintaining that consistent presence that we've had for more than 100 years in Pennsylvania really helps. If development is getting ahead of us, so to speak, or a narrative is getting ahead of us, it's really hard to catch up with that.
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So we maintain a consistent presence in our communities, both from a financial community support standpoint, through our foundation, through our charitable giving, also through our employee base. We have thousands of hours of volunteering in our communities. We are on local boards, nonprofits, economic development organizations.
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We have employees whose direct job it is to be in the regions and to be community partners in the regions. And then through our communications, right, it's really different, consistent, but different messages depending on the audience.
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A lot of what we've been doing right now, Kinsey, is some myth-busting around data centers and development. As you can imagine, folks are nervous, right? AI makes people nervous. Then they hear about environmental issues or land use issues. And we get all that. And...
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I think in the first instance, we don't discount that level of concern, but we come to the table with a credible and transparent voice for our communities. I think they're looking to us, not I think, I know they're looking to us to play probably an even bigger role than we normally would with a new customer because of the type of customer it is. I will tell you early on,
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we were treating this development more of kind of our normal type of development and transmission planning and siting, we've now really leaned into understanding that we need to be a consistent and transparent voice for our communities. So not only are we talking and partnering with our local officials, economic development agencies, organizations.
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influential folks in the communities and our everyday residents. But we're also working a lot more with those customers at the outset to help them understand how they need to show up in the communities. So we are used to, as an infrastructure company and a regulated utility, having public open houses and communicating about what we're doing. Not every developer or customer understands that that is a level of expectation that these communities have.
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Where developers or hyperscalers have been out early and transparently and talked very clearly about community benefits and potential impacts and how they would mitigate those, we've seen communities respond really well to that.
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Where they haven't, it's been more challenging. And so, look, we know this growth is good for our state. It needs to be done responsibly, both from a cost allocation standpoint, a siting standpoint, a how you live and work in a community. And so we've really leaned in a lot more with our customers and trying to get that set out on the right foot.
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Yeah, it's interesting to hear all about this. I think that it, to me, brings up this question of what the ultimate impact is. You know, when you're talking about partnerships and economic development that PPL Electric Utilities is really, you know, trying to take a leadership position on, whether that's
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consulting and advising for these large load customers, joining foundations, charitable giving, some of the examples you mentioned here. When we're looking at the ultimate impact of work like that, of partnerships like that, is it to improve the storytelling? Is it to help customers to really understand what's going on with their utility? Or does it actually, you know, keep their bills lower? What is sort of the ultimate outcome that you're working toward when you're facilitating these kinds of partnerships?
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what is the benefit to our communities? What is the benefit to our customers? So we know that economic growth, irrespective of taking it away just from large load customers, but economic growth,
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is good for the health and stability of our communities. It helps to manage costs of infrastructure, ours and others. It helps folks have those family-sustaining jobs.
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that they need in their communities. There are benefits to education. Our community college system is really, has really leaned into the technology and jobs needed for this digital economy or the types of jobs that we need to build and maintain our infrastructure. So look, we've lived and worked. I'm a customer. I'm my own customer, right? I live in my service territory.
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I can look at our over 1,000, 1,400 customers or 1,400 employees and say the same thing. They are the neighbors, the employees, the customers. So we have a vested interest in making sure that we have vibrant, healthy, sustainable communities. So it starts there. We're not going anywhere. We have to live and work in these communities as well. So it starts there and then moves to the pieces that you talked about.
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is education and transparency and helping people understand, you know, who wants to locate in their backyard, the type of work that we're doing and why it's important and how it benefits them. And again, working with our customers, I think in a little more focused way to help them understand the communities that they're entering,
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And really what our expectations are as well as the utilities serving them and living and working in those communities and having to build infrastructure to serve them. Right. We want the entire project to to go well. It's it's nobody's interest really to be kind of to be fighting and having these kind of apremonious relationships. So that is really where we start is kind of the the health and sustainability of our communities.
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And then really, how can we do our job in the best way possible, which is delivering reliable, affordable, safe and sustainable electricity? That ultimately is PPL Electric Utilities' job at the end of the day for all of our customers, whether you are a hyperscaler, a farmer, a small business owner or a homeowner. So we've got to balance all of those interests.
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Yeah. And balancing all those interests, I imagine, is not a very simple job. You know, over the last several years of this effort toward economic development and investing in the community, at the same time as the demand reality has truly shifted in the United States across the country, what have been some of your biggest learnings? You know, if you were to tell another utility leader what you've walked away with in terms of lessons learned, I would love to hear what that looks like.
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Yeah. I mean, I think the first I mentioned kind of early and often on communication. Look, I think that is, it's not, it can never be too early and can never be too often. Right. So I think kind of not taking that for granted. Sometimes we can get into our own utility bubbles and sometimes even kind of with our state partners, kind of we're operating in this place that we know the rules, we know
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We know the end game, right? You've got to make sure that folks that are impacted are joining you at the beginning and carrying through. And so like township supervisors and local officials have been really at the center of a lot of this growth in our communities.
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And so, look, if I had to do something differently as a company, it would have been engaging them directly a lot earlier and helping them with kind of tools and knowledge that they would that they would need to.
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I don't think anyone could have possibly anticipated the amount of growth that we're seeing and the level of activity. It came really fast. I think we caught up. We collectively caught up really quickly, Kinsey.
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But again, you know, hindsight's 20-20. So that would be one of those things is perhaps not to take for granted that everyone understands the business that we're in and what this growth looks like and why it's important. You've got to really, you know, you've got to really, I mentioned electricity has become, you know, a kitchen table issue. You've got to take it down to the kitchen table really at the outset. So I think that's a lesson learned. Yeah.
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Reputation and transparency and credibility. Those are three words that we can live and die by as a regulated utility. And again, not taking that for granted and making sure that we are protecting that at all costs because it's
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It enables us to do the important work that we're doing. But leaning in with customers like we've never leaned in or had to lean in before and making sure that they understand that and have a show up in communities in which we're working would be another lesson learned, I think, is really kind of.
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We need to respect our role and responsibilities as a utility. But kind of going out of that a little bit, maybe to help our customers and our communities, is something that we've really leaned into. And so that would be kind of another lesson learned is that early and often communication, kind of working with the customers and not taking for granted that everyone knows kind of what's in it for them at the end.
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Yeah, yeah, makes a lot of sense. I think it also tees up an interesting question about how how that might change. You know, when we look ahead, how do you think the conversation about a utilities role and maybe even specifically a regulated utilities role in a local community could shift in the coming years as the reality of working in utilities shifts? Tell me a little bit more about your vision of what community involvement, what, you know, community engagement looks like for utilities as we move forward. Yeah.
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We need to think about it in a much more expansive standpoint. Now, taking a step back, I mean, PP Electric Utilities has always been extremely present and involved with our communities and with our regulators, with our policymakers.
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It's not that we haven't been doing something that we now need to do. I think it's more of where we're showing up. So maybe in the past we weren't as active in planning commission conversations or some of those local conversations where
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around ordinances and kind of how folks are planning their communities. They're wanting to hear from us now because they have questions for us. And so I think we're probably going to be showing up more in those kinds of conversations, representing the infrastructure that we provide and talking about things like how we allocate cost.
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how we upgrade infrastructure, all of those types of things, probably at a little bit different level of detail than maybe we've had to do in the past. And that's fine. Again, that's that's transparency and credibility. I'd rather they ask us because we have the answers to provide to them. So I think it's really around, I think, some of those details that maybe folks weren't paying as much attention to in the past.
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We were, but I think that the development and interest is just at such a scale that in particular local officials, planning commissions just need to educate themselves a little bit more on what this all means. And so we want to make sure that we're a partner in doing that with them.
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Just the other thing I would just mention is on kind of the regulatory piece and making sure that I mentioned our large load tariff, for example, making sure that we've got the structure, the regulatory structure, the cost allocation, in some respects, perhaps legislative initiatives in the future that enable us to accommodate this kind of
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growth to accommodate what is happening in PJM right now with a reliability backstop auction where they are looking to match new generation with large load, which is something that absolutely we support, but making sure that all of those federal, regional, federal, and state rules down to our utility align so that we can accommodate growth, but with the appropriate garb rails for all the rest of our customers.
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Yeah, that alignment is a really crucial part of this conversation across so many entities, so many different moving parts. Do you have any advice for utility leaders who might want to forge those kinds of critical partnerships? What would you say has been most important or has been most impactful for you as you have been trying to create those kinds of partnerships that really make an impact?
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So I think for us, it's really, I mean, we were pretty early in how we were designing our electric service agreements, how we were engaging with these large load customers, our regulators and PJM as our regional transmission organization. So we were having to create structure and guidelines where they didn't exist.
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So I would say leaning into those, if they don't exist, you've got to create them. You don't do that in a vacuum, right? You do it with appropriate stakeholder input. But I guess probably one of my pieces of advice is maybe don't always, can't always wait.
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Because these things are upon you. And again, we have an obligation to serve. We want to serve load and those that want to interconnect into our system. So sometimes that means you've got to lean in and create some of that structure. And so we had a regulatory timing, again, with our distribution rate case where we were able to put this retail tariff in place.
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But we've been in regular communications and forums with policymakers, regulators, customers to help develop these. But you can't always wait for them to be developed because this world, this economy is moving much, much faster these days. And so as regulated utilities, sometimes we've got to start designing what those rules should look like and then getting the appropriate stakeholders in place.
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Yeah, not always enough to just keep up, right? You gotta be proactive. So Christine, this has been such a wonderful conversation to hear more about the work that you're doing, the work that you and your team are doing. I really, really appreciate you taking the time to tell me more about what all of that looks like and what your advice for utilities as we move into a continued uncharted territory, what that advice looks like. So thank you so much for joining me today on Power Perspectives.
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Thanks, Kinsey. My pleasure. Thank you, as always, to all of you as well for tuning into another episode. I'm Kinsey Grant Baker, and I will see you next time.
