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PSC Considers Dispute In Calculation Of Purchase of Receivables (POR) Discount Rates

September 27, 2018

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

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The Maryland PSC yesterday heard from parties concerning the calculation of the purchase of receivables (POR) discount rates at Pepco and Delmarva, which has been disputed as part of the annual update to the rates

During this year's annual update, it became apparent that Pepco (and Delmarva) applies a payment posting sequence to retail choice revenue under POR consolidated billing. As described by PSC Staff, for customer payments that are not paid in full, Pepco first applies customers' payment to distribution (and SOS if any) charges prior to applying payment to retail choice charges. For example, if a retail choice customer has a $50 arrearage consisting of unpaid SOS and distribution charges and a $50 arrearage for unpaid retail choice charges ($100 total arrearages) and makes a partial $50 payment to Pepco, all SOS and distribution charges would be paid in full while the retail choice arrearage would remain unpaid. Staff said that this payment posting sequence is likely to result in higher uncollected costs for retail choice, as a percent of billed charges, than for SOS and distribution uncollected costs.

Pepco argues that the payment posting sequence described above is included in its delivery service tariff and is required to be followed. Staff argues that, notwithstanding any legacy language in the customer tariff, the calculation of the POR discount rate is addressed in the supplier coordination tariff, and the current partial payment allocation as it relates to revenue used in the POR calculation is not consistent with the supplier coordination tariff.

It is Staff's contention that partial payments should be prorated between all billed energy and distribution charges (including retail choice charges, SOS charges and base revenue charges).

Staff proposes to use uncollected costs from Pepco's most recent class cost of service study ("CCOSS") as a proxy for what uncollected costs would be if charges for SOS, retail choice, and distribution services were paid on a pro-rata basis in Pepco's payment posting sequence

As a result, for residential customers, Staff's proposed change (as well as change in how RM54 costs are allocated among classes) would result in a new residential POR discount rate of 0.1878%, compared to the current 0.6339% and Pepco's proposed update of 0.6859%.

The same concerns apply at Delmarva, and Staff recommended the same changes at Delmarva. However, at Delmarva Staff also took issue with a proposed three year amortization of 2017 uncollected residential uncollectible costs (driving an increased discount rate), as Staff is concerned it will shift costs to future retail supply customers and also could become unmanageable.

At Delmarva, Staff recommends using the CCOSS as a proxy for residential uncollectibles, proposes changes based on modification to RM54 cost allocation, and would reject an amortization of three years for 2017 uncollected residential uncollectibles.

The effect of all Staff's change would be a residential POR discount of 3.3779% at Delmarva, compared to the current 1.7078% and a proposed level of 2.9279% if Staff's RM 54 proposal is adopted and the 2017 uncollected costs are amortized over three years.

The PSC ultimately took the matters under advisement, and suspended the tariffs to update the POR discounts for 60 days. The PSC encouraged discussion among the parties to the extent agreement can be reached on certain issues. Among other things, Delmarva has now proffered a four-year amortization, which parties will consider

During the PSC's meeting, Commissioner Mindy Herman pressed Staff on whether, under its recommendation, Staff was seeking a change to the customer tariff payment posting process.

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