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Maryland PSC Rejects Proposed Order Eliminating SOS Adder at BGE; Sends Case Back to ALJ

November 11, 2014

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

Similar to action undertaken at Pepco and Delmarva, the Maryland PSC said that Baltimore Gas & Electric SOS rates should continue to include some form of an Administrative Charge, a bypassable adder reflecting certain costs to serve SOS customers not in energy commodity prices, but directed further proceedings to develop the specific level of the charge.

In doing so, the PSC reversed a proposed order from a public utility law judge which would have eliminated the SOS Administrative Charge completely (Case 9221).

"[W]e conclude that SOS should continue to include some form of Administrative Charge, in addition to the purchased power costs, transmission charges and taxes, which are not at issue in this case. However, we also conclude that the record has not been sufficiently developed to finalize BGE's Administrative Charges. Accordingly, we remand this matter to the Public Utility Law Judge Division (PULJ) to conduct further proceedings to determine appropriate SOS Administrative Charges for BGE," the PSC said.

The PSC said that a record should be developed to establish the total Administrative Charge costs and rate for BGE broken down by the individual components; namely, incremental costs, uncollectible costs, return and cash-working capital (CWC), whether stated together or separately, and, if appropriate, an Administrative Adjustment.

The Administrative Adjustment component, which is a refund paid to all distribution customers from revenues under the SOS Admin. Charge, essentially serves as a proxy for certain costs that have not been unbundled and which are not reflected in SOS rates, and which are still recovered in distribution rates (e.g. overhead, etc.)

Regarding the return applicable to SOS service, "we expect a record to be developed that will permit the Judge to determine specific dollar and kWh rate figures," the PSC said.

"The Judge also shall make a finding as to whether CWC should be included in the return requirement, or whether the return and CWC should be separately stated," the PSC said.

"We specifically direct BGE, and invite other parties, to provide evidence of the ability to finance SOS CWC needs using short-term debt exclusively, and the cost of doing so. Furthermore, we want to make clear that, although financing SOS CWC at BGE's overall distribution rate of return might be a reasonable outcome, such an outcome is not to be presumed and must be supported by the record," the PSC said.

"Finally, we do not make any findings at this time whether the Administrative Adjustment should remain part of the Administrative Charge, nor whether Staff's proposed Allocated Cost component should be adopted as part of the Administrative Adjustment or in lieu of it," the PSC said.

Staff's Allocated Cost component was a proposed bypassable adder to SOS to reflect the costs of certain customer-service related functions undertaken by the utility to support SOS customers only. These costs included customer accounts expenses, billing expenses, credit and collection expenses, customer service expenses, and customer information expenses, and are currently recovered in nonbypassable distribution rates.

At Delmarva and Pepco, a contested settlement has been recommended for approval by an ALJ (click here), under which SOS rates would include an administrative charge (or adder) consisting of a utility return component, an incremental cost component, an uncollectibles component, and an administrative adjustment component. Cash Working Capital costs will be added to SOS rates, but under a separate process and not part of the administrative charge. That proposed order relating to Pepco and Delmarva remains pending before the PSC.

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