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Elimination of POR in Favor of Pro Rata Billing Seen As Solution to Polar Vortex Pricing

August 26, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Maryland should consider implementing pro-rata utility consolidated billing, instead of purchase of receivables, to address the variable rate pricing issues which were revealed during this year's polar vortex, the Maryland Office of People's Counsel said in comments on a working group report.

Shifting to a pro-rata approach would place a collections burden on retail suppliers, and, as intimated by OPC, would serve as a check on excessive rates.

"The change of the POR consolidate[d] billing to a Pro Rata approach was discussed as one way to address the variable rate product issue," OPC noted. "The option is currently available under COMAR consolidated billing regulations, as an alternative to POR, but has not been selected by any supplier to OPC's knowledge. OPC believes that the POR requirement needs to be revisited in light of the burden from high supplier rates/bills placed on utilities. The burden included not only increased collections activity, but also extraordinary measures taken by utilities to provide some measure of relief to their customers, such as automatically enrolling customers into budget payment plans, or other special payment plans, which are labor intensive undertakings. Eventually, the cost burden for all that extra work and for increased bad debt falls upon all utility ratepayers. A change to a Pro-Rata approach would put the burden back on those suppliers to pursue their own collection efforts for delinquent balances."

OPC further noted that potential restrictions on POR could be adopted

"A set of proposals for introducing restrictions on the purchase of receivables by utilities related to variable rate prices, or restricting the amount of the receivables that the utility had to purchase of variable and fixed rate contracts to that equal to the rate for Standard Offer Service and utility gas commodity prices were submitted for consideration of the PC 35 work group. A substantial concern with the past winter's experience was that the extreme bills of variable rate customers, some of whom were energy assistance eligible, were paid with the limited funds that came from ratepayers, federal taxpayers and private donations. The low-income population is already challenged with affordability with their utility bills. The current process results in the diversion of limited assistance funds to pay extraordinary supplier variable rate charges that the utility has acquired through POR," OPC said.

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