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PUC Rules On Retail Supplier's Complaint Over Purchase Of Receivables (POR) Clawback Charge

June 14, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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The Pennsylvania PUC has affirmed an initial decision from an ALJ which denied a complaint from Respond Power, LLC filed against the FirstEnergy Pennsylvania electric distribution companies ("Companies") concerning the imposition of a purchase of receivables clawback charge on Respond Power, as the PUC denied the exceptions of Respond Power

Respond Power's complaint concerning the POR clawback charge had been exclusively first reported by (see story here)

In particular, Response Power objected to application of the POR clawback charge (whose authorization was included in a May 2016 order authorizing a default service plan for the period beginning June 1, 2017 (DSP IV)) to receivables related to the period before June 1, 2017.

Respond Power alleged that such application of the POR clawback charge to receivables prior to June 1, 2017 constituted impermissible retroactive ratemaking

Respond Power alleged that the clawback charge, included in DSP IV, was implemented on August 21, 2016, during the DSP III plan period and prior to the DSP IV service commencement date of June 1, 2017. Moreover, Respond Power alleged that the clawback charge is based on write-offs that occurred from September 1, 2015 through August 31, 2016, and included amounts dating back to 2013

The PUC issued an order stating, "we disagree with [Respond's] argument that the invoiced charges applied pursuant to the modified clawback provisions violate principles prohibiting retroactive ratemaking."

"As a threshold consideration, we need not address, in depth, that the conclusions in the Initial Decision regarding the appropriate classification of the administrative charges represented by the clawback provisions are rates, per se, under the Code. The participation of the EGS in a POR is voluntary and as such, the EGS has implicitly assented to modifications of the program, assuming such modifications are reviewed and approved by the Commission according to procedural due process," the PUC said

"The DSP IV Settlement approved by the Default Service Order clearly explains the terms and conditions of the clawback provision and how it would operate. According to the Settlement, the clawback charges will be assessed based on historical data from the prior twelve-month period. We acknowledge the Companies’ argument that neither the 2016 nor the 2017 clawback charges were imposed on Respond until after the entry of the Default Service Order approving the clawback provision as part of their respective PORs. We agree with the Companies that the clawback charges did not modify the terms of the prior POR programs but is an authorized revision to the program that was approved in the Default Service Order. See Tr. at 80-82. The use of billing determinants from a prior, historic period, does not render the operation of the clawback improperly retroactive. Therefore, we find no merit in Respond’s claim that the Commission was not aware of the use of the historic data to assess the charge," the PUC said

"The Companies further aver that contrary to Respond’s claim, the clawback charge is an administrative fee for participation in the Companies’ POR program that is applied prospectively to all EGSs and was charged only after the clawback provision was approved in the Default Service Order. Moreover, the Companies argue that the charge is not retroactive just because the clawback screening process analyzes the track records of the EGSs to identify their mode of operation, product type and pricing policies and how these factors drive higher uncollectible account expense. Furthermore, the record clearly shows that the Companies’ calculation and assessment of the clawback charges for 2016 and 2017 were in accordance with the terms and conditions of the clawback provisions approved by the Default Service Order. Therefore, we find no merit in Respond’s retroactive ratemaking argument," the PUC said

Respond Power also alleged in the complaint that the POR clawback program was structurally flawed because the EDCs failed to provide notice informing Respond that its customers were not paying their bills, thereby preventing Respond from taking steps to avoid the imposition of the clawback charges

The PUC denied this exception as moot, citing changes to the clawback program since the complaint was filed

"Respond argues that because the Companies do not provide Respond with the information on its customers who have high uncollectible accounts, it is unable to contact those customers to offer them a new contract that may be more manageable for them or undertake any other actions with regard to those customers to avoid or minimize/mitigate Respond’s exposure to the clawback charges. See Respond St. 1 at 10. Respond submits that had it known its customers were not paying their EGS charges, it could have contacted them to determine whether different terms or conditions of service might assist those customers to pay their bills," the PUC said

"Respond also asserted that, to the extent that the Companies view Respond’s higher prices compared to the Companies’ default service as the root cause of the uncollectible expenses related to the EGS charges, if the Companies provided Respond with high uncollectible accounts, it would be able to cancel the contracts of non-paying customers and return such customers to default service in order to avoid the assessment of the clawback charges and that this could effectively resolve the high uncollectible issue," the PUC said

"Based on the above arguments, to the extent that the main focus of Respond’s alleged structural flaws involves EGS access to information about the payment status of their customer accounts, the service periods to which the written-off amounts relate, and the order of posting of partial payments, we consider this Exception moot. We note that we have addressed this issue in the Companies’ subsequent DSP filings," the PUC said, noting that under a 2018 order, the EDC must provide to EGSs a customer arrears report with unpaid aged EGS account balances (details here)

The PUC also denied Respond Power's exception concerning due process, as the PUC said that Respond Power was served with the EDCs' initial default service petition which included the proposed POR clawback (first reported by here a day after the EDCs' filing)

The PUC also said that, "we do not have any reason to reach a conclusion that the Commission-approved clawback provisions in the Default Service Order are unjust and unreasonable."

"We also disagree with Respond’s claim that it has presented sufficient evidence in this proceeding to demonstrate changes in facts and circumstances following the Commission’s approval of the clawback charges," the PUC said

"Finally, we note that the DSP IV Settlement approved the clawback charge as a two-year pilot program. As part of the pilot roll out, we encourage the Companies to work collaboratively with the affected EGSs to address the high uncollectible accounts for these EGSs," the PUC said

C-2016-2576287 et al.

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