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Utilities File Amounts For New POR Discount Rates Following PSC Order

PSC Excluded Implementation Costs For Market Changes From POR Discounts

Addressed Spike In Uncollectibles, Impact on POR Rates


August 16, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Pepco and Delmarva have filed with the Maryland PSC compliance filings containing new purchase of receivables discount rates in compliance with recent letter orders from the PSC

The PSC had issued letter orders on the utilities' proposed updates to the POR discounts earlier this month; however, the resulting discount rates from the decisions made in such orders were not contained in such orders themselves.

Under the utilities' compliance filings, the new POR discount rates are to be updated as noted below, effective September 1. (discounts under the current tariff and a revised July proposal provided for comparison):

Pepco-MD POR Discount:
                       July      
             Current   Proposal  Final
Residential  1.5449%   1.2709%   0.6339%
Type I       0.0000%   0.0000%   0.0000%
Type II      0.0000%   0.0000%   0.0000%
Hourly       0.0000%   0.0000%   0.0000%




Delmarva-MD POR Discount:
                       July   
             Current   Proposal  Final
Residential  1.0902%   2.6341%   1.7078%
Type I       0.0000%   0.0000%   0.0000%
Type II      0.0000%   0.0000%   0.0000%
Hourly       0.0000%   0.0000%   0.0000%

In setting the new discounts, the PSC addressed two issues: recovery of RM 54 implementation costs in the discount, and calculation of the uncollectibles discount in light of a spike in uncollectibles due to implementation of a new utility billing system (SolutionOne)

RM 54 addressed various revised customer protection rules, including accelerated switching.

The utilities had initially sought to include RM 54 compliance costs in the POR discount rates.

The PSC rejected, without prejudice, recovery of RM 54 costs through the POR discount

"The Commission does not believe that it would be appropriate to force suppliers and their retail customers to bear the costs associated with the implementation of a program that benefits all ratepayers, as well as the competitive market as a whole," the PSC said

"The Commission finds that a customer rate case would be a more suitable approach for recouping these costs, potentially allowing the recovery of such costs to be spread among all customers who may benefit therefrom. RM54 implementation costs incurred by Pepco are currently included in the Company’s ongoing rate case (Case No. 9443). If Delmarva so chooses, it may include RM54 costs in Case No. 9455. In such cases, the Commission will evaluate the appropriateness of allowing RM54 cost recovery from the balance of the fund developed as a result of previous and continued over-collections by the respective companies. As such, the Commission encourages Pepco and Delmarva to develop a strong record on the matter," the PSC said

Regarding the manner by which to calculate the 2016 uncollected costs, the Commission found both approaches suggested by the utilities to be flawed. The initial proposal of using January through December 2016 data would heavily skew the resultant percentage used in the overall POR discount rate calculation as it includes the time period for the previously noted dramatic increase in recorded uncollected costs. The utilities' revised (July) proposal (which significantly reduced the sought uncollectibles component) which used October 2016 through March 2017 data may avoid the time period containing the severe spike in uncollected costs, but neither company can guarantee that the timeframe does not also include additional costs from the SolutionOne implementation issues, the PSC said.

"The Commission finds the most accurate manner by which to estimate what the 2016 uncollected costs would have been, if not for the SolutionOne implementation issues, is to use the average uncollected costs over the life of the Companies’ respective POR programs in order to determine future uncollected costs," the PSC said

"Furthermore, the Commission authorizes Pepco to recover all 2016 uncollected costs through the reconciliation factor used in POR discount rate calculations. The Commission approves Delmarva’s proposal to amortize its 2016 uncollected costs in the reconciliation factor over three years, thereby allowing Delmarva to recover all uncollected costs while keeping its POR discount rates in line with historical values," the PSC said

"Since the inception of the POR program, the Commission has allowed the under or over collection of revenue to earn interest at the rate paid to customer deposits. In essence, if a company over collects over the prior year, this earned interest would reduce the POR discount rate. Conversely, if a company under collects, this earned interest would increase the POR discount rate. The Commission acknowledges that the PHI Companies’ under collection in 2016 was due to internal implementation issues and, theoretically, should not be passed on, in whole or in part, to retail choice customers. However, the earned interest is a less than nominal amount and therefore will not be felt by retail choice customers. The Commission declines to stray from established practice given that the resultant outcome would not be affected. The Commission authorizes the Companies to receive interest on their under-collected costs," the PSC said

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