Regulator May Modify Purchase Of Receivables Mechanism If Alteration Found To Be "Cost Effective", Draft Says Current Mechanism "Inequitably" Benefits Retail Suppliers
July 30, 2020 Email This Story Copyright 2010-20 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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The Connecticut PURA issued a proposed interim decision in its review of the electricity purchase of receivables mechanism, under which PURA would maintain the current mechanism only because alternatives have not been found to be cost effective, as PURA warned that future changes would be warranted if found to be cost effective, "because the current method inures inequitably to the benefit of licensed third-party electric suppliers."
In the proposed interim decision, PURA states, "the Public Utilities Regulatory Authority (Authority or PURA) reviews the cost and benefits of altering the current purchase of receivables (POR) method used by the electric distribution companies (EDCs). The Authority finds that, at this time, it does not appear cost effective to alter the POR method, and, therefore, the current method will remain in place. However, if altering the POR method is later found to be cost effective, alteration of the system would be warranted, just, reasonable, and in the public interest, because the current method inures inequitably to the benefit of licensed third-party electric suppliers. The Authority will continue to review the EDCs’ filings in Docket No. 20-03-15 as it relates to the impact of COVID-19 on payments received and the current POR method. The Authority will monitor this information and will determine if the unfolding pandemic impacts the preliminary cost-benefit analysis that was the basis of the Authority’s initial determination."
As previously reported, PURA had been examining POR changes such as supplier-specific discounts, or limiting the purchased receivables to the equivalent shadow-billed default service cost.
Conn. Gen. Stat. § 16-244c(j) requires, "[e]ach electric distribution company ... to pay such suppliers in a timely manner the amounts due such suppliers from customers for generation services, less a percentage of such amounts that reflects uncollectible bills and overdue payments as approved by the Public Utilities Regulatory Authority."
"After reviewing each of these alternatives and soliciting other proposals, the Authority has determined that the current POR mechanism should remain for the time being due to the restrictions placed on hardship customers contracting with suppliers, the constraints of the EDCs’ billing systems, the need for a more comprehensive legislative solution, and the need to evaluate more payment data resulting from the current pandemic," the draft states
"The current POR system, however, still inures to the benefit of the suppliers by effectively guaranteeing suppliers to be paid based on the amounts billed to their customers, regardless of their customers’ payment status. The Authority acknowledges that a legislative amendment to permit a more comprehensive update to the POR system may be necessary," the draft states
PURA noted its prior decision which ordered the return of all hardship customers to default service. "Requiring hardship accounts to receive supply from standard service could resolve many of the inequities being borne out through the current POR method," the draft notes
"While neither EDC was able to provide information related to a specific break down of the hardship and non-hardship uncollectible data attributed to each third-party electric supplier, it is reasonable to assume based on the data contained in Docket No. 18-06-02 that a significant amount of this uncollectible hardship debt resulted from customer accounts who have contracted with third-party electric suppliers," the draft says
However, the draft still states that, "The Authority notes that even when excluding hardship customer accounts, the current POR system results in all ratepayers subsidizing the uncollectible accounts of customers receiving service from suppliers."
"Based on its preliminary findings, however, the incremental value of instituting a new POR mechanism currently does not appear to outweigh the EDCs’ projected costs to implement a new POR calculation mechanism. Nevertheless, if any of the current variables factoring into the cost-benefit analysis change, such as a return of hardship customers to suppliers, an upgrade of EDC billing systems to accommodate an alternative POR calculation without incurring large costs, or other changes in the supplier market, the Authority reserves the right to reexamine its determination," the draft says
"Both EDCs assert that updating their billing methods to track uncollectibles by each supplier would be unduly burdensome because of the increased time, labor, and the complexity of changing their systems, and would come at a significant cost to ratepayers. The EDCs noted many obstacles involved in associating customers with a particular supplier, since many customers change suppliers on a regular basis (i.e., an uncollectible balance can emanate from multiple suppliers). Specifically, the EDCs indicated a change to POR could require the EDCs to design a manual process to implement a complicated set of rules, rather than relying on the process designed in the current billing systems. See Eversource and UI Responses to Interrogatories EOE-12 and EOE-13. This, in turn, would result in increasing costs over time due to the inability to automate POR," the draft notes
The draft also says that the statutory POR requirement was originally established to support a nascent third-party electric supplier market, by exempting suppliers from the burden of arrearages. "The supplier market is no longer nascent, but is fully implemented and must bear its own weight," the draft states
"Costs associated with the supplier market should be borne by the suppliers who benefit from the competitive supply market, not by all ratepayers. As a result, amendments to Conn. Gen. Stat. § 16-244c(j) should be considered that would allow the Authority to create a POR that creates a truly unsubsidized third-party electric supplier market," the draft states
The draft also states that, "In response to the COVID-19 public health emergency and the ensuing economic crisis, the Authority, in Docket No. 20-03-15, Emergency Petition of William Tong, Attorney General for the State of Connecticut for a Proceeding to Establish a State of Emergency Utility Shut-off Moratorium, directed all regulated electric, natural gas, and water companies to cease residential service terminations for nonpayment as a protective measure through the end of the public health emergency. Non-residential customers are also included in the shut-off moratorium, which concludes on August 1, 2020. However, it is important to note that, 'the EDCs [continue to] purchase account receivables from competitive suppliers pursuant to the POR program and continue to pay for the purchased accounts receivable on due dates that have and will reflect normal economic conditions unaffected by COVID-19.' Eversource Written Comments dated June 29, 2020, p.1. The Authority recognizes that the current circumstances outlined in this proceeding may change as a result of the pandemic. Accordingly, as the EDCs continue to report on the impacts of COVID-19, as required in Docket No. 20-03-15, the Authority will monitor the filings and take administrative notice in this docket of any data that informs the current POR mechanism."