Peco Withdraws Proposed 12% Rate Hike As Philly CRE Stares Down Higher Energy Costs

A utility provider’s proposal that would have increased power bills at commercial properties across greater Philadelphia was axed Thursday as consumers and businesses continue to struggle with elevated energy costs amid the conflict in Iran.

Peco withdrew its March 30 request for a 12.5% rate increase, citing “financial pressures facing households and businesses.”

The move comes after Pennsylvania Gov. Josh Shapiro accused the utility provider of “pure greed” in a social media post earlier this month. Peco said in a release that it spoke to Shapiro and its customers and took their input into consideration. 

“Customers and communities across the region are facing sustained financial strain driven by rising costs for housing, food, healthcare, transportation, energy supply costs, and other everyday essentials,” the company said in the release.

“PECO reassessed the cumulative impact of the proposed rate changes on customers and determined now is not the right time to move forward,” Peco added.

The proposed rate increase caught the attention of Savills Philadelphia Research Manager Daniela Stundel, who mentioned it in the brokerage’s first-quarter report on the greater Philadelphia office market. 

She said the higher utility bills could have impacted how much space office tenants would be willing to take, threatening to slow the market's momentum. During the first three months of 2026, tenants leased more than 1.3M SF of office space regionwide, up 26% from the prior quarter and 20% year-over-year.

“Landlords cannot eat the entirety of that number,” Stundel said earlier this month. “They’re going to pass it on. That’s something tenants are going to have to take into account.”

Peco had planned to use the extra revenue to help fund $10B worth of infrastructure improvements over five years. The utility provider’s systems have struggled with increased demand and more frequent extreme weather events.

That was a worthy reason to raise rates, said Parkway Corp. CEO Robert Zuritsky, whose Center City office portfolio includes the brand-new Chubb Building and Morgan Lewis’ headquarters, delivered in 2023.

“I believe the utility when they say we need to upgrade our infrastructure,” he told Bisnow the day before Peco withdrew its proposal.

“I’m not crazy about increases, but I’m understanding,” Zuritsky said, adding that his office tenants would have eaten the extra costs if they came to pass.

CBRE First Vice President Anthony LiVecchi, a broker focused on greater Philly office, said improving resiliency should be a top priority for Peco.

A rate increase would have had a “substantial” impact on tenants and led them to ask harder questions about a building’s HVAC systems and energy-efficiency measures, but he it wouldn’t have blunted office transaction volumes, LiVecchi said.

“I don’t think a rate increase for utilities is necessarily going to give people pause,” he said.

He and Zuritsky said the energy affordability concerns Shapiro was responding to have had an impact on greater Philly’s office workers.

This is particularly true for those who drive to work, which LiVecchi said could become an even greater issue if the conflict in Iran drags on and keeps gas prices high.

“Their costs to do that are now increasing, and it does put a burden on things,” he said.

The war is too fresh for Zuritsky to have seen an impact on his Center City parking portfolio’s March numbers, but if the fighting is protracted, he expects revenue will drop this summer, when Philadelphia is expected to see a massive tourism boom.

“We will see it if gasoline is $4 to $5 [per gallon] going into the summer,” he said. “That is going to affect vacationing and some other trips.”

Shapiro’s sharp language toward Peco came after he showed support for the data center industry last year, which has become increasingly unpopular statewide amid a development boom and ballooning consumer energy costs.

The data center development surge has led utilities to invest more in their infrastructure, potentially causing consumer electricity bills to spike.  

Nationwide, 51 investor-owned utility providers plan to spend at least $1.4T on power plants, transmission lines and other grid infrastructure by 2030, according to a report from electricity consumer advocacy group PowerLines. That is up 21% from what these companies had outlined in their five-year plans one year ago.

“Investor-owned utilities are signaling a record-breaking wave of capital spending, and history shows that those plans are often a leading indicator of future utility rate increase requests,” PowerLines Executive Director Charles Hua said in a statement.