Energy Choice
                            

Matters

Archive

Daily Email

Events

 

 

 

About/Contact

Search

Pennsylvania Utilities Seeking To Add "Clawback" To Purchase of Receivables, Cite "Predatory Pricing" Practices By Suppliers

November 4, 2015

Email This Story
Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Met-Ed, Penelec, Penn Power and West Penn Power have proposed adding a "clawback" to their purchase of receivables program in seeking approval of a default service procurement plan for the two-year period beginning June 1, 2017, citing "predatory pricing" practices by certain retail suppliers which is driving up the amount of uncollectibles.

"In order to be able to maintain the POR program for all EGSs serving residential and small commercial customers, the Companies propose the addition of a clawback clause to their POR programs related to EGS write-offs. Under this clause, an annual charge would be assessed, beginning September 2016, to those EGSs that exceed 150% of the average percentage of supplier write-offs as a percentage of revenue as calculated separately for each of Met-Ed, Penelec, Penn Power and West Penn for each twelve-month period ending August 31st. EGSs would then be charged the difference between their actual annual write-off amount and 150% of the respective Company's average annual EGS write-offs as a percentage of billed EGS revenues. The charge would recover the amount of EGS write-offs over 150% of the operating company average and would be billed to the EGS annually," the FirstEnergy-PA utilities said

The utilities said that they do not "entirely" recover uncollectible accounts expense associated with their POR programs through their tariffed rates.

"Allowances for uncollectible accounts expense were approved in the Companies' recent base rate cases which split uncollectibles into a portion attributable to distribution rates and a separate portion attributable to default service and POR rates, with the default service/POR-related portion recovered through the Companies' DSS Riders. The default service/POR-related portion of uncollectible accounts expense for each Company is incurred, in part, as a result of the Companies' POR programs. However, the Companies' uncollectibles have grown and continue to grow at a rate that exceeds their ability to gain approval of revised allowances," the utilities said

"The Companies' forecasted 2015 uncollectible accounts expense has grown to $46.9 million – a significant increase over the $33.3 million allowance reflected in rates, representing a 41% increase," the utilities said

"[T]he Companies' aggregate net POR-related write offs have grown from a total of roughly $1.2 million in 2012 to a current year aggregate as of September of over $8.2 million," the utilities said

"The Companies further identified a wide variance in percentages for EGS write-offs as a percentage of generation revenues billed over a twelve-month period. For example, for the twelve-month period ended June 2015, EGS write-offs as a percentage of revenues for Met-Ed were on average 1.81%; however, the percentages by specific EGS varied from a low of 0.04% to a high of 36.4%," the utilities said

"Because collection is not an issue EGSs must concern themselves with, the Companies believe that those EGSs with a higher percentage of write-offs are unfairly burdening the Companies and their customers, through their pricing practices, with disproportionately higher write-offs than their peers," the utilities said

"In order to address this disparity in EGS-related write-off percentages, the Companies propose to collect a portion of this growing uncollectible accounts expense from EGSs; specifically, those EGSs whose practices are driving higher write-offs as a product of the types of offers they make to customers," the utilities said

The utilities said that the percent of EGSs whose write-offs exceed 150% of the respective utility average represent 30% of Met-Ed registered EGSs, 31% of Penelec's registered EGSs, 21% of Penn Power's registered EGSs, and 18% of West Penn's registered EGSs. At least 18 separate EGSs would have been subject to the clawback for the 12-month period beginning July 2014 had it been in place.

One EGS had a write-off rate of 85%, according to utility data

Click here for masked write-off percentages of EGSs exceeding the utilities' proposed 150% threshold

The utilities said that the clawback, "would in effect serve as a disincentive to those EGSs that offer customers unreasonable or variable rates that are likely to result in higher write-offs for the Companies – costs which would eventually be passed along to other customers in subsequent rate proceedings."

"To illustrate the significance of the value of this proposal to the Companies and their customers, had such a mechanism been in place for the period of July 2014 through June 2015, qualifying EGSs would have paid Met-Ed $2.2 million, Penelec $1.7 million, Penn Power $0.3 million and West Penn $1.2 million, or $5.4 million in total," the utilities said

"The Companies propose to retain the [clawback] amount charged to EGSs if each individual Company's actual uncollectible accounts expense is higher than the amount of uncollectible expense in base rates plus the amount included in the DSS Rider for the twelve-month period ended September 30th of each year. Alternatively, the Companies will refund the EGS charge to customers through a reduction to their respective DSS Rider if the Companies' actual uncollectible expense is less than the amount of uncollectible expense recovered in base rates and the DSS Rider," the utilities said

Additionally, the utilities are also proposing revisions to their supplier tariffs such that EGS refunds under the POR go directly to the utilities to apply to the customer's account balance first, if necessary. Currently, EGSs serving customers under the utilities' POR programs are providing refunds associated with their service directly to the customer, rather than providing refunds through the utilities' billing system. The utilities' proposal would ensure that the EGS refund is applied first to a customer's open account balance before refunding any remaining amounts to the customer, the utilities said

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
NEW! -- ERCOT Business Development Manager -- Retail Supplier -- Houston
NEW! -- Channel Manager -- Retail Supplier
NEW! -- Marketing/Channel Manager -- Retail Supplier -- Houston
NEW! -- Supplier Services Account Executive
NEW! -- Manager, Operations -- Retail Supplier -- Houston
NEW! -- Settlements Analyst -- Retail Supplier
NEW! -- Data Administrator -- Retail Supplier
NEW! -- Customer Support and Retention Rep -- Retail Supplier -- Houston
NEW! -- Contracts Analyst -- Retail Supplier -- Houston
NEW! -- Pricing Analyst -- Retail Supplier
NEW! -- Billing Analyst -- Retail Provider -- Houston
NEW! -- Energy Services Program Director - $230K
NEW! -- Senior Retail Analyst -- Retail Supplier
NEW! -- Manager, Retail Pricing -- Retail Provider
NEW! -- Retail Commodity Pricing Analyst -- Retail Supplier
NEW! -- Director of Pricing, Risk & Portfolio -- Retail Supplier
NEW! -- Manager/Director, Customer Retention and Satisfaction -- Retail Supplier -- Houston
NEW! -- Bilingual Rep Support Specialist -- Retail Supplier

Email This Story

HOME

Copyright 2010-15 Energy Choice Matters.  If you wish to share this story, please email or post the website link; unauthorized copying, retransmission, or republication prohibited.

 

Archive

Daily Email

Events

 

 

 

About/Contact

Search