PECO's Data Center Deal: A Rate Hike Wrapped in Holiday Lights?
The end of 2025 brings a mixed bag for PECO and PPL customers: a rate increase, a shiny new agreement with Amazon Web Services (AWS), and the usual holiday light displays. Let's break down what these seemingly unrelated events mean, and whether the festive glow is masking a less appealing reality.
The Amazon Agreement: A Risky Bet?
FERC approved PECO's transmission service agreement with Amazon Data Services on November 21st. The core of the deal: Amazon will foot the bill for grid upgrades needed to power its new data center in Falls Township, PA. On the surface, this sounds like a win-win. Amazon gets its power, PECO gets infrastructure improvements, and ratepayers are supposedly shielded from the costs, even if the data center project falls through. FERC approves PECO-Amazon data center transmission agreement - Utility Dive
But FERC Commissioner Judy Chang's concurring statement raises some critical questions. She rightly points out the lack of a clear framework for assessing customer protections in these kinds of agreements. While the Mobile-Sierra presumption favors freely negotiated contracts, are we really sure that PECO customers are adequately protected here?
Chang highlights that states have approved or are considering over 60 large load tariffs. That's a lot of potential strain on the system. And her suggestion that FERC proactively consider guaranteeing sufficient customer protections, like the "higher of" pricing policy, is telling. It suggests the current system isn't guaranteeing those protections.
Think of it like this: PECO is essentially betting on Amazon's data center being a long-term, reliable customer. If Amazon pulls out, the upgrades are still there, but who really benefits? Are ratepayers getting a fair return on this investment, or are they indirectly subsidizing Amazon's expansion? This is the part of the report that I find genuinely puzzling.
Rate Hikes and Capacity Market Realities
Adding insult to potential injury, PECO and PPL customers are facing electricity supply rate increases starting December 1st. PECO's rates are jumping 6% to 11 cents per kilowatt hour, and PPL's are up 3.7% to nearly 13 cents. Pennsylvania electricity supply rates from PECO and PPL set to increase on December 1 - 6abc Philadelphia
PECO attributes this increase, in part, to the PJM capacity market. The most recent auction drove prices up due to anticipated resource availability challenges and power plant retirements. In other words, electricity is getting more expensive because it's getting harder to guarantee a reliable supply.
Now, PECO procures electricity on behalf of customers who don't shop around. The impact of that PJM capacity auction is baked into the overall supply cost. But here's the rub: how much of this rate increase is actually due to the capacity market, and how much is a result of increased demand from, say, data centers? PECO doesn't break out those numbers, and that lack of transparency is concerning.
It's like a leaky bucket. The PJM capacity market might be one hole, but increased demand from large customers like Amazon could be another. We're told the bucket is leaking, but we don't know the size of each hole.
Holiday Lights: A Distraction?
And then there are the holiday light displays. The Wanamaker Light Show, the RiverRink Winterfest tree lighting, the Franklin Square Electrical Spectacle – all supported by PECO. These are feel-good events, designed to generate positive PR and goodwill.
PECO is spending money on these attractions. Details on exactly how much remain scarce, but the impact is clear: positive associations with the PECO brand. But is this a clever distraction? Are the dazzling lights meant to draw our attention away from the less-appealing news of rate hikes and potentially risky deals with tech giants?
It's a classic marketing tactic: associate your brand with positive emotions to soften the blow of negative news. But as a data analyst, I'm less interested in the warm fuzzies and more interested in the cold, hard numbers.
A Calculated PR Play
PECO's strategy seems clear: offset negative press (rate hikes) with positive PR (holiday lights) while simultaneously positioning itself as a forward-thinking partner in the digital economy (Amazon deal). Whether this strategy succeeds in the long run depends on whether customers buy it, and whether the Amazon deal delivers on its promises. For now, I'm reserving judgment – and keeping a close eye on my next PECO bill.
