Regulator Opens Review Of Changes To Purchase Of Receivables Program, Will Examine Costs/Benefits, Alternative Methods

Supplier-Specific Discounts, With True-ups, Have Been Suggested To Regulator

January 13, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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The Connecticut PURA has assigned docket 20-01-33 for a proceeding entitled, "PURA Review of Electric Distribution Companies’ Method of Payment to Licensed Electric Suppliers for Uncollectible Customer Accounts".

In a case request form, Staff noted that, "Under the current purchase of receivables method, Electric Distribution Companies (EDCs) pay Licensed Electric Suppliers (Suppliers) almost 100% of the Suppliers’ charged electric rate, even when a customer account is uncollectible."

In the Public Utilities Regulatory Authority’s (Authority) Second Request for Written Comments issued on April 2, 2019 in Docket No. 18-04-25, PURA Investigation Regarding Issues Related to Uncollectible Accounts, the Authority requested comment on, "what changes could be made to the EDCs’ cost recovery systems (purchase of receivables) currently in place, which allows suppliers to collect almost one hundred percent of amounts billed, that would allow the EDCs to reduce the amounts paid to suppliers for uncollectible accounts so that the burden on any uncollectible amounts may be allocated more fairly between the EDCs and the suppliers."

See background related to POR as an issue in the broader Uncollectible Accounts proceeding here

Based on the comments received in response to the Second Request for Written Comments in Docket No. 18-04-25, the Authority initiated the new proceeding on its own motion and pursuant to Conn. Gen. Stat. Sections 16-11, 16-19-, 16-19e, 16-244c, 16-244i, and 16-245d.

"In this proceeding, the Authority will review the costs and benefits of the current purchase of receivables method used by EDCs, and, if appropriate, order any changes to or replacement of the current purchase of receivables method with another alternative method, if the Authority determines such changes or replacement may be just and reasonable and in the public interest," the notice opening the docket stated

As exclusively reported by EnergyChoiceMatters.com, in a prior proceeding addressing uncollectibles generally, the Office of Consumers Counsel had criticized applying a uniform POR discount to all electric suppliers, and recommended supplier-specific discounts with true-ups

"The policy disadvantage of the single percentage discount approach is that by insulating an electric supplier from the risk of non-payment, it allows a supplier to pursue a customer base that has a much higher uncollectible risk than average, and to overcharge those customers with impunity. In other words, the current approach allows an electric supplier to (1) target customers and communities where the uncollectible risk is higher; (2) immediately or eventually overcharge them; (3) receive compensation from the EDCs almost immediately, at a small percentage discount; all while (4) insulating the supplier from the resulting risks of the customer’s inability to pay a potentially exorbitant generation charge," OCC said

"This in turn has the potential to cause cascading issues for customers. First, this approach adds another significant burden to a customer that is already struggling to pay and keep their family’s electricity service in place. Second, to the extent that a customer’s account lapses into uncollectible status based on an exorbitant generation supply charge from an electric supplier, such would raise the overall uncollectibles percentage and ultimately lead to increases in the electric bills of the general class of electric customers," OCC said

"Overall, as suggested by the question being here asked [sic] by PURA, OCC would at this point like to see electric suppliers be paid for their receivables by the EDC at a rate that reflects the uncollectible percentage of such supplier’s own customer pool," OCC said

"This approach would provide a better policy balance for the present circumstances, allowing electric suppliers to continue to bill through the EDCs and receive timely payment for receivables, while also eliminating the gamesmanship and profiteering that can arise from an electric supplier targeting a customer population with higher-than-average uncollectible risks," OCC said

OCC envisioned that the EDC would develop an uncollectible percentage for each supplier for each calendar year to be used for that year’s receivables, based on the prior year’s experience with that supplier’s own uncollectible account level (or alternatively, on the last two years’ experience if that is viewed as providing a more accurate estimate). OCC also recommended that a true-up be performed. OCC suggested that, by March of a calendar year, the EDC would compare each supplier’s prior year’s actual uncollectible percentage to the estimate, and either credit or charge the supplier for the resulting revenue difference. The credit or charge could presumably be flowed through a present invoice from the EDC to the supplier for the supplier’s current receivables. If the supplier has exited the market, the security should be maintained for a short time to cover any potential charge of this type.

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