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FirstEnergy EDCs: If $500,000 POR Clawback Charge Puts Retail Supplier In "Fragile" Condition, "Serious Questions" Exist If Customers Should Be Made Aware Of This Info

November 9, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The FirstEnergy utilities have filed an answer opposing Respond Power's petition at the Pennsylvania PUC which was filed to prevent the EDCs from withholding nearly $500,000 of Respond receivables as an offset against a POR clawback charge.

The POR Clawback results from the PUC's approval of the FirstEnergy EDC's default service plan for the period beginning June 1, 2017. As previously reported, such order, issued on May 19, 2016, authorized, on a two-year pilot basis, a POR Clawback mechanism which Respond Power described as being, "retroactively based on revenues, write-offs and prices for the period from August 31, 2015 through August 31, 2016."

Click here for more details on the new POR Clawback mechanism

Respond Power had argued that the clawback charge amounts to impermissible retroactive ratemaking, given that during the period initially covered by the clawback, suppliers were not informed such receivables would later be subject to a clawback

"Therefore, Respond Power had no opportunity to address these concerns and minimize the write-offs, such as through a return of nonpaying customers to the Companies for default service," Respond Power had said.

However, the FirstEnergy EDCs in their answer said that the clawback charge is not a utility rate, and therefore does not violate retroactive ratemaking.

"[T]here is no basis for Respond Power’s claim that the Clawback provision violates the prohibition against retroactive ratemaking," the FirstEnergy EDCs said. "That prohibition applies only to 'rates' for utility 'service.' The Clawback provision is a refinement of the Companies’ existing POR Programs set forth in their Supplier Coordination Tariffs. As such, the POR Programs do not constitute a utility 'service,' and the Clawback Charge is not a 'rate.' The POR Program is a voluntary program, not part of the obligation to serve imposed on utilities under the Public Utility Code. Consequently, the purchase of EGS receivables is not a 'service' nor is the Clawback provision a 'rate' for utility service. In fact, the Commission itself has held that a supplier coordination tariff is not a 'services tariff' but, instead, simply sets forth the basic requirements, protocols and processes for EGS-electric distribution company ('EDC') interactions that allow the Commission to monitor the development of retail competition," the FirstEnergy EDCs said

The FirstEnergy EDCs also took aim that the holding of receivables as an offset to pay for the disputed clawback charge would cause irreparable financial injury

"Respond Power’s claims that it needs 'immediate' relief and that its alleged 'injury' would be 'irreparable' are, at most, mere conjecture. In neither its Petition nor its accompanying affidavit does Respond Power provide anything resembling facts to support its conclusory statements," the FirstEnergy EDCs said

"Respond Power alleges that its financial viability would be threatened by the 'cash flow problems' created by having to pay Commission-approved Clawback charges totaling $484,797. Respond Power has provided no financial information that would support such a claim. Indeed, if Respond Power’s financial condition is so fragile that paying the Clawback charge would threaten its viability, serious questions exist as to whether that is information that should already have been provided to customers in Pennsylvania receiving generation service from Respond Power and potential customers who may be contemplating enrolling with Respond Power," the FirstEnergy EDCs said

The FirstEnergy EDCs called Respond's petition an impermissible collateral attack on the PUC's May 19 Order adopting the clawback

"Just as important, contrary to Respond Power’s contention, the Commission has already determined that the Clawback provision is lawful. That decision may be challenged only on a direct appeal of the May 19 Order, which Respond Power has not done - and could not do because it declined to participate in the administrative proceeding in which the May 19 Order was entered, and because the time permitted for filing a Petition for Review with the Commonwealth Court has expired," the FirstEnergy EDCs said

Respond Power had also called the clawback implementation impermissible because it came in a default service proceeding captioned as relating to default service for the period beginning January 1, 2017.

The FirstEnergy EDCs responded, "Respond Power was served with the Companies’ Joint Petition requesting approval of their respective DSP IVs together with the extensive testimony and other material that accompanied them (collectively, the 'DSP IV Petition'). The Companies’ DSP IV Petition included a proposed Clawback provision that would implement charges as of September 1, 2016 based on a one-year look-back at write-off experience, and that provision was discussed at length in the testimony accompanying the Companies' DSP IV Petition. Respond Power claims that it did not participate in the Companies’ DSP IV proceeding because the caption of the case did not specifically delineate the changes to the Purchase of Receivables ('POR') Program embodied in the Companies’ DSP IV Petition. However, other EGSs and the trade association for EGSs in Pennsylvania intervened and participated actively in the litigation and settlement processes, including with respect to the Clawback provision. In fact, the Commission itself has stated that it is customary for POR Programs to be addressed in default service proceedings."

EnergyChoiceMatters.com exclusively reported in November 2015 that the FirstEnergy EDCs were seeking to implement a backwards-looking POR clawback, beginning September 2016

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