While Noting "Inequities" Benefiting Retail Suppliers From Purchase Of Receivables, Regulator Finds POR Changes Not Cost Effective At This Time

Regulator Will Continue To Monitor POR, Says Changes "Warranted" If Cost Effective

August 26, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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In a final interim decision in its review of potential changes to the electric purchase of receivables (POR) mechanism, the Connecticut PURA finds that changes do not appear to be cost effective at this time, but finds that changes, "would be warranted," if later found to be cost effective

"In this Interim Decision, 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, to ensure the POR method does not inure inequitably to the benefit of licensed third-party electric suppliers," PURA said

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, and if necessary, request more detailed estimates from the EDCs regarding costs of implementing suggested changes to POR explored herein," PURA said

As previously reported, PURA had been examining POR changes such as (among other models): supplier-specific discounts, limiting the purchased receivables to the equivalent shadow-billed default service cost, requiring the customer to be placed on default service if the customer's account has uncollectibles, or eliminating POR altogether

"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," PURA said in the final interim order

Noting its prior decision that hardship customers must be served under default service and may not shop for a retail supplier, PURA said, "As a result, a significant portion of the current inequities due to the current POR method will likely be resolved as hardship customers are returned to standard service."

"The Authority will continue to monitor the impact of its Decision in Docket No. 18-06-02, and reserves the right to reopen this proceeding to further investigate the prudency and fairness of the current POR methodology depending on the results of restricting hardship customers from contracting with suppliers," PURA said

"The Authority reviewed several alternative methods of calculating POR proposed by Parties in their Written Comments; however, it must be noted that all of these alternative methods would require significant changes to the EDCs’ billing systems. Due to the lack of flexibility of the EDCs’ billing systems to accommodate the alternative POR calculation methods discussed, any changes thereto would result in additional costs borne by ratepayers. Based on the Authority’s preliminary findings, 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, and the Authority cannot justify imposing the costs to update the EDCs’ billing systems on ratepayers at this time. 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," PURA said

PURA noted that 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."

"The POR requirement was originally established to support a nascent third-party electric supplier market and exempt suppliers from the burden of arrearages. The statute also exempted suppliers from the standard business practice of billing its customers," PURA said

In the decision, PURA finds that, "The statute limits the meaningful changes to POR the Authority could currently impose; however, it is clear that the market conditions have changed in the intervening fifteen years since the enactment of Conn. Gen. Stat. § 16-244c(j). The third-party electric supplier market is now well established in Connecticut."

"The supplier market is no longer nascent, but is fully implemented and must bear its own weight. 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," PURA said

In conclusion, PURA said, "the Authority finds, based upon the constraints of Conn. Gen. Stat. § 16-244c(j), and the limitations of the EDCs’ billing systems, coupled with hardship customers being returned to standard service, it is not currently cost effective to update or modify the POR billing method at this time. The current POR system, however, still effectively guarantees that suppliers are paid based on the amounts billed to their customers, regardless of their customers’ payment status. Accordingly, the Authority will continue to monitor the beneficiaries of the current POR system. The Authority acknowledges that a legislative amendment to permit a more comprehensive update to the POR system may be necessary for it to make substantive changes to POR that justify the costs of upgrading the EDC billing systems. In the meantime, 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."

Docket 20-01-33

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