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PPL Corp. Files for Rate Hike

Zacks Equity Research

Diversified utility PPL Corporation (PPL) filed for an increase in the electricity rates with the Pennsylvania Public Utility Commission. The rate hike will enable the company to recover the investment made for the development of electricity supply infrastructure and also recover the high operating costs. If approved, the requested hike will result in an annual revenue growth of $104.6 million or 2.9%.

The rate hike will also enable PPL Corporation to continue with its infrastructure development work and customer education. Upon approval from the commission, the hike will be effective January 1, 2013 and increase the average residential bill of the customer by $7 per month.

Even if the commission approves the rate hike without any alteration, the new electricity bill for an average consumer in 2013 will be lower than what they have paid in January 2010. Despite a hike in rates, the consistent decline in the generation rate, which accounts for 67% of the electricity bill contributed to the decrease in electric bill from 2010 levels.

It is a usual practice of the utility companies to incur expenditures to provide better service to customers. The expenditure ranges from changing the generation units, fitting scrubbers to the units to lower pollution, laying down new transmission lines, cutting down trees to protect the distribution lines, paying increased labor costs and also replacing the aging equipment.

We believe these expenditures were essential for the smooth operation of a utility company. PPL has invested around $1 billion in its distribution system in the previous two years. The recovery of a portion of the same will allow the company to continue with its development work, which ultimately results in uninterrupted supply to customers.

Based in Allentown, Pennsylvania, PPL Corp. generates and delivers electricity and natural gas to consumers in the United States and United Kingdom. PPL Corp. retains a Zacks #3 Rank, which translates into a short-term Hold rating. The competitors of the company are Exelon Corp. (EXC) and FirstEnergy Corp. (FE).

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