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Maryland PSC Weighs Whether Retail Supplier's Receivables Should Be Excluded From POR Due To Inclusion Of Customer Charity Donations In Receivables

Including Broker Fee As Eligible For POR Discussed

Staff: May Need To Look At Whether Gift Cards, Airline Miles, Rewards Are Eligible For POR

November 20, 2018

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Copyright 2010-17
Reporting by Paul Ring •

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Note: This story was first published at 11:52 am on Nov. 20 with an alert to our email subscribers

During its administrative meeting today, the Maryland PSC heard from PSC Staff concerning Staff's recommendation that receivables related to a charitable donation portion of a customer's bill with a retail supplier, under a specific business model of a broker, be deemed ineligible for inclusion in the utilities' purchase of receivables program

The PSC was considering the application of Charity+Power, Inc. (CPP) for a broker license

Originally, CPP proposed a model under which 10% of the bill for customers it brokered for a supplier would be donated to a non-profit selected by the customer

However, according to a "bucksheet" from PSC Staff, CPP changed its business model such that, rather than being 10% of the bill, the donation rate for a given electric plan will instead be equal to the difference between: (1) the projected local utility rate over the contract period and (2) the supplier’s base rate plus three mills. As an example, if CPP projected Baltimore Gas and Electric's rate over a 12-month period to be 7.3 cents/kWh, the donation rate for customers selecting a supplier whose base rate was 6.8 cents/kWh would be $0.002/kWh [$0.073 – ($0.068 + $0.003)]. The $0.003 additional charge is the cost of CPP’s service. In a March 16, 2018 email to Staff, CPP also noted that it now intends to make all donations in CPP’s name, rather than in the customer’s name

Staff in the bucksheet said that the tariffs of Maryland utilities make it clear that the purchase of receivables (POR) does not include, "receivables associated with non-commodity charges or Early Termination Fees."

The recoverability of non-commodity charges through POR was addressed by the Commission in connection with a 2009 filing by Delmarva Power & Light Company ('DPL') which had proposed POR tariff language. By Letter Order dated October 7, 2009, the Commission determined that, "...the requirement for purchase of receivables relates to only the commodity charges, and [DPL] is not required to purchase non-commodity charges," Staff noted in the bucksheet

"A portion of the CPP-supplier’s charges is attributable to the Company’s charitable donation, which is decidedly not a commodity charge. Therefore, the charitable donation portion of the CPP-supplier’s charges is ineligible for POR," Staff said in the bucksheet

"[T]he charity donation that is part of the rate that CPP will charge its customers is not a supply cost," Staff said in the bucksheet. "[T]he donation does not facilitate the supplier’s purchase of the electricity supply to serve the supplier’s customers. Thus, the donation is not directly related to the supplier’s purchase of electricity. Therefore, the donation is ineligible for POR. Because CPP intends to charge a flat broker fee that would include the donation component, Staff believes that, as a practical matter, no portion of CPP’s broker charges are eligible for POR," Staff said in the bucksheet.

Staff further discussed its position during the administrative meeting (AM) this morning

Staff during the AM highlighted the fact that CPP's charity donation was a "discrete" portion of the rate that the customer is paying

Staff during the AM contrasted charity donations that are a "discrete" portion of a rate with general charitable contributions of suppliers to various causes.

What was not discussed specifically was a model similar to CPP's original model, under which there is no specific per-unit or volumetric charge associated with the donation, but under which a discrete percentage of each bill would be contributed to charity (e.g. 2% of supply charges donated)

"What we think is different in this case is that there is a donation portion of the bill integrated into the broker's charge," Staff said during the AM

Staff during the AM was asked by Commissioners whether broker fees generally should be eligible for inclusion in POR

"Generally speaking, Staff's position is that broker fees would be permissible under POR," Staff said during the AM. Staff said during the AM that broker fees are one of the supplier's costs of doing business associated with their general supply function, and thus should be eligible for POR.

In CPP's case, Staff said during the AM that it would be impractical under the POR program to sever the charity donation portion of CPP's charges from its underlying broker fee. Because the fee includes a portion that is ineligible for POR, the entire charges are ineligible, Staff said.

Commissioners then asked Staff about non-commodity items that suppliers may include as part of electric plans in the market, such as gift cards and promotional items. Staff was asked from the bench whether such items raise, "similar concerns."

"Well, yes" Staff said during the AM, but Staff went on to note that gift cards or rewards are not tied to part of the customer's specific rate

"We have not looked at, we may need to look at those other situations, the gift cards, the airline miles, that obviously are not supply products but, by the same token, are not necessarily tied to the rate you're paying," Staff said during the AM

Staff said that its focus has been on the specific business model presented by CPP.

Staff noted that if the CPP charges are deemed ineligible for POR, then CPP would be required to use dual billing.

Commissioners noted that if CPP's license was conditioned on CPP using only suppliers who will dual bill CPP's customers, then the Commission would need not reach a conclusion on the legal issue of the eligibility of the receivables for POR that had been presented by Staff

The PSC voted to grant Charity+Power, Inc. an electric broker license, to serve residential and commercial customers in all service areas, conditioned on CPP's use of suppliers that will utilize dual billing for CPP's customers. The PSC did not opine on the legal issue of the eligibility of the receivables for POR that had been presented by Staff

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