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AEP Ohio Seeks Approval for Purchase of Receivables Program
AEP Ohio has sought approval to offer a purchase of receivables program, as part of its electric security plan proposal for the period 2015-2018
Click here for related story today on electric security plan
Specifically, AEP Ohio is proposing to introduce a POR program for electric suppliers without recourse. While there would be no initial discount for supplier receivables, there would be an administrative charge on suppliers.
Uncollectibles, for both shopping and non-shopping customers, would be collected under a nonbypassable Bad Debt Rider. There would be no discount to purchased receivables for uncollectibles.
The "initial" discount rate for the POR program will be zero. However, AEP Ohio noted that it could incur future costs to modify the POR program functionality not already recovered in rates, and such costs could potentially be recovered through a discount.
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ADVERTISEMENT While there would be no discount to receivables, there will be a fee imposed on suppliers for implementation and administrative costs.
AEP Ohio describes the costs assigned to retail suppliers thusly:
"Since AEP Ohio is voluntarily offering this service to the CRES providers, and as the CRES providers will bear no risk or expense for bad debt costs in the program, the Company proposes only a fair and equitable administrative fee charged yearly to those CRES providers utilizing consolidated billing, based upon their current number of customers registered for the consolidated billing option. For new CRES provider market entrants, a forecasted number of enrolled customers will be used. The fee will have two components: 1) recovery of the initial capital investment over 5 years, and 2) on-going administrative costs. Those fees recovered related to AEP Ohio's administrative costs will be a credit to cost-of-service for customers. This fee will be charged each year as part of our registration process. After five years, the fee will only be based upon the on-going administrative cost component."
"The proposed yearly per-consolidated bill fee is $0.77," AEP Ohio said.
AEP Ohio also describes the implementation and administrative cost recovery thusly in an outline of the program:
"A yearly one-time non-refundable 0.77 per-customer fee will be applied at time of CRES provider registration with AEP Ohio as part of the registration fee, based upon the number of customers the CRES provider has enrolled in consolidated billing ... For new CRES providers, the fee will be based upon estimated number of customers to be enrolled in consolidated billing for the coming year."
Retail suppliers will be required to use POR for all accounts billed on utility consolidated billing. Suppliers will be able to participate in utility consolidated billing with POR while simultaneously offering dual billing to other customers.
To prevent gaming, shopping customers that are already enrolled on dual billing with a retail provider, and with receivables 60 days in arrears or more, will not be allowed to enroll in consolidated billing until the customer is in arrears 30 days or less.
Only commodity-related charges will be included in POR. Non-electric related charges, such as early termination fees, will be excluded from the purchase of receivables program, due to potential issues regarding collection.
Existing receivables of retail suppliers will not be purchased at the time of POR start-up. Receivables will be purchased based upon the first bill cycle after implementation.
The schedule of payments to retail suppliers will be based upon a yearly backcasted Day Sales Outstanding (DSO) value, also called "revenue lag," calculated for all AEP Ohio shopping and non-shopping customers, measured from the 15th of the revenue month in which receivables were billed. For example, if AEP Ohio's 2014 DSO calculation is 42 days (which is the current value), payments made to retail providers in 2015 would be made on the 27th of the following month, assuming 30 days in the revenue month.
AEP expects it will take between 9 months to 12 months to complete programming of a purchase of receivables program from the date of approval.
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December 23, 2013
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com
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