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Bombshell: New York to Review Ending Purchase of Receivables Without Recourse
October 22, 2012
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Copyright 2010-
The New York PSC's newly initiated investigation of retail market issues (click here) will include the examination of whether ESCO receivables purchased by the utility should be purchased with recourse.
As explained by the PSC: "When receivables are purchased without recourse, the value of the receivables being purchased is generally discounted based on historical net write off percentages, and the utility assumes full responsibility for collections from customers. The applicable discount is based on the payment history of all ESCO customers or all ESCO customers in a specific service class, and does not vary by ESCO. In contrast, where receivables are purchased with recourse, if the customer does not pay his or her bill, the utility charges a portion of the write off to the ESCO and the ESCO assumes responsibility for the collection of those amounts. The amount charged back to the ESCO is the difference between what the customer owed the utility including ESCO charges and what the customer would have owed the utility had he or she been a full service customer of the utility."
The PSC said that Staff's review of available data indicates that in at least one utility's service territory, the proportion of ESCO customers that participate in the utility's low-income assistance program is higher than for the utility's full-service customers
"Staff reports that the policy of allowing utilities to purchase receivables without recourse, with a single discount rate applicable to all ESCOs, may facilitate the ability of individual ESCOs to shift the cost of uncollectibles attributable to their own customers, to all other ESCOs. This policy should be reviewed as it may substantially weaken the incentive that exists in most competitive markets, for firms to acquire customers who are willing and able to pay, as well as the incentive for firms to charge reasonable prices," the PSC said.
Questions issued for comment by the PSC concerning the POR issue include:
• "What would be the impact of requiring utilities to purchase receivables with recourse and thereby have ESCOs assume whole or partial responsibility for the uncollectibles of their customers? Should this be a requirement?
• "What would be the impact of discontinuing POR without recourse for some ESCOs and how would those ESCOs be identified?
The PSC's retail market investigation will also encompass a "greatest hits" of proposals opposed by ESCOs, including terminating the availability of choice to low-income customers; mandatory posting of all ESCO prices; termination of ESCO referral programs; termination of door-to-door marketing; and a requirement for affirmative consent for contract renewals.
See related story today for more details on other retail market proposals
Cases: 12-M-0476, 98-M-1343, and 06-M-0647
Copyright 2010-
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