Addresses Higher Financial Security Requirements For SCB Suppliers, Requirements For Purchasing Utility Receivables
Staff Encourages PSC To Study If Cherry-Picking Of Better-Paying Customers For SCB Harms UCB-POR Program, Other Suppliers
September 23, 2020 Email This Story Copyright 2010-20 EnergyChoiceMatters.com
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Staff of the Maryland PSC have filed, on behalf of the Supplier Consolidated Billing Working Group (SCBWG), proposed regulations and business processes to govern the implementation of electricity and natural gas supplier consolidated billing.
Staff noted that major issues for decision by the PSC include the following: 1) additional qualifications for retail
suppliers who wish to perform supplier consolidated billing; 2) customer eligibility for
participation in supplier consolidated billing; 3) payment posting hierarchy; 4) treatment of
supplier bundled charges; 5) bill view access for utilities; 6) supplier default; and 7)
circumstances under which a change of billing method may occur. Staff has tried to explain
these issues in its Report Regarding Business Processes.
Under the filed proposal, suppliers already operating in Maryland as a UCB or Dual billing provider would need to apply to the Commission for authority to provide SCB.
In terms of financial requirements for SCB from a PSC licensing perspective, the proposal would require a supplier seeking to use SCB to maintain total bonding or financial guarantees with the Commission in the amount of $500,000. Staff noted that this total amount could include the supplier’s existing financial integrity guarantee of $250,000 (thus the SCB would be an incremental $250,000). A supplier may petition the Commission to maintain a lower amount of bonding with the Commission
Furthermore, suppliers would need to maintain a bond equal to the amount of energy assistance funds received on behalf of SCB customers (with an initial bonding requirement of $50,000 for this provision, adjusted based on actual energy assistance funds received)
Additional SCB collateral bonding frameworks will also be required by utilities and the specifics will be documented in utility supplier coordination agreements and/or tariffs.
"The utility will hold a bond with the supplier. The new bond requirements between suppliers and utilities will cover the utility’s risk of outstanding receivables not purchased by the supplier. Today the electric utilities hold bonds for some UCB billing expenses. The SCBWG has agreed the utility’s bond does not need to be discussed in regulation," the proposal states
With respect to bundled supplier products, the proposal addresses several issues implicated by SCB and attendant regulations
The current proposal is if a supplier offers a bundled product, then the supplier will:
(1) Disclose the commodity price for energy service separately from other products if the commodity is sold separately from the other products; and
(2) State the total charges for all products and services as the price of the commodity if the Supplier does not permit a customer to purchase the electric product without purchasing the other products or services;
(3) Disclose on a customer’s contract the percentage of the product that shall be treated as commodity versus non-commodity for payment posting; and
(4) Figure in the cost of the product over a 12-month period with 1/12 of the cost being attributed to a single month if the product has a one-time cost up front, for the purposes of the price to compare.
• Non-commodity costs are defined as: "Additional products that are unrelated to providing energy service to the customer."
Suppliers have indicated that it is unlikely a supplier will be able to unbundle a product. This has implications for payment posting depending on the payment posting structure approved by the Commission. In all three of the proposed payment posting structures considered by the work group, if a commodity charge could be inclusive of a value-added product there is a possibility that the value-added charge could be paid before a utility charge that could lead to termination.
Staff has offered two solutions to this problem:
(1) If a supplier cannot unbundle charges that the charge be paid last in payment posting; or
(2) if a charge cannot be unbundled an index proxy price based on SOS or market prices with an adder is used to determine how much of the charge can be treated as a commodity for payment posting. Either of these approaches is appropriate and would allow a supplier to offer bundled products while giving some reasonable measure to ensure that value-added products are not paid before charges that could lead to service termination.
At this time Staff is proposing that bundled products be paid last since an agreeable proxy index price could not be agreed to, and suppliers have indicated that it is not possible to unbundle products.
Suppliers have opposed all these proposals and believe that if a charge is bundled and the costs cannot be separated, the entire charge is treated as a commodity charge. This is the approach followed in Texas. It should be noted that Texas does not allow arrears to be transferred among billing providers, though suppliers do have service termination authority. Some suppliers have indicated that any other requirement would detract suppliers from wanting to participate in the SCB market.
Regarding utility charges, under the proposal, suppliers will purchase utility receivables up to 28 days for residential customers and up to 23 days for non-residential customers after the charges are received from the utility, with no discount
The Exelon utilities proposed an alternative purchase of utility receivable for SCB under which the purchase by suppliers would be at a discount. With this mechanism, there would be no opportunity for suppliers to return unpaid utility charges back to the utility for collection. The Exelon utilities said that this approach would resolve complex non-consensus items including partial payment priority order, how to address arrearages when customers switch billing methods with an SCB supplier, and how to address arrearages when customers switch suppliers. Under the Exelon utilities' proposal, the proposed discount rate to be used by SCB suppliers would initially be based upon utilities’ pre-COVID uncollectables and other factors organized into a formula similar to that used to calculate today’s Utility Consolidated Billing Discount Rate. The initial Year 1 discount rate would be unique to each utility and apply to all SCB suppliers. Subsequent SCB discount rates would be supplier specific based upon each supplier’s actual first year experience and actual POR factors calculated by SCB suppliers for that year.
Turning back to the Staff proposal, while the schedule for suppliers' payments to utilities will be fixed, suppliers will be allowed to bill customers on any schedule the supplier chooses, subject to a customer’s agreement in the contract.
The proposal does allow suppliers to return distribution-related debt to the utilities under the terms described below
Specifically, under the proposal, a supplier cannot resell utility arrearages back to a utility if the charge is older than 90 days for electricity and 120 days for gas. The age of the charge will be determined by the date the charge is received by the supplier to go on the customer’s bill plus the number of days a customer normally has to pay the bill with the utility.
In an order requiring that SCB be implemented, the PSC had said that repurchase of utility arrearages by the utility should occur, "[w]hen a supplier is no longer serving a customer..."
This led to several interpretations in the working group
Under the proposed regulations from Staff, a supplier can only return debt once the customer no longer has a relationship with the supplier. This means the supplier would have to stop providing the customer SCB, UCB, or dual
billing before the supplier could return the arrearage. There would be no obligation to return the customer to SOS or SS [gas standard service].
An alternative interpretation is that a supplier may not return distribution arrearages until the customer is returned to SOS or sales service SS. This interpretation of the Order also means a customer with an arrearage cannot transfer to another supplier for UCB or SCB unless the customer is dropped to the utility for non-payment or the customer switches to SOS or SS and pays the arrearage off before switching again. This interpretation also means that if a contract is allowed to be assigned or transferred such that it changes the billing method, the arrears may not be returned to the utility.
Another alternative interpretation is that the supplier can resell arrearages back to the utility once the supplier stops providing SCB service to a customer. This means a supplier could change a customer’s billing method, and if the supplier sends the customer a final bill and follows the agreed upon collection procedures, the supplier can sell the distribution arrearages back to the utility.
With respect to partial payments, the proposal is to apply partial payments to the oldest charges first. If utility and commodity charges are the same age, then such charges would be paid based on a pro rata basis. Charges unrelated to the utility and commodities are paid last. Energy assistance payments may not be applied to value-added products unless the supplier has permission from the organization providing the funds. Suppliers may first apply deposit money held to supply charges before applying deposit money to the other charges. If a supplier offers a bundled product and cannot unbundle the commodity costs from the value-added costs, the supplier shall pay the bundled product last.
Concerning late fees, Staff proposes that a Supplier may charge any late fee allowed by its contract with a customer. If it is not covered in the supplier’s contract, then the late fee is capped at 5 percent of customer total unpaid amount. Suppliers will follow all late fee customer protections that utilities follow.
Concerning customer drops, the proposal provides that a residential customer who misses payment can be dropped for non-payment once a supplier gives the customers a 5-day notice. A non-residential customer who misses payment can be dropped for non-payment once a supplier gives the customer a 3-day notice.
In contrast, under current billing (UCB and dual), suppliers cannot cancel a residential customer’s contract without providing the customer 30 days notice
The SCBWG is proposing that SCB be a bill ready process.
With respect to utility information listed on the SCB, there were initially two disagreements regarding information provided by the utility to print on the supplier’s bill. One was the utility’s customer service number, since suppliers opposed being required to print a utilities number for billing on the bill. "A compromise was reached where a utility may provide their customer service number, but the description of the number will not be indicate [sic] that it is for billing," the proposal states
The second, ongoing disagreement is the provision of the utility’s service center address. The utilities believe this address should be printed on the bill while the suppliers do not think the address should be printed on the bill. The proposed regulations exclude the utility from providing this address.
Since the process is a bill ready process, any bill messaging sent by the utility to the supplier will be printed on the supplier’s bill. Staff recommends that any required messaging that is currently printed on the utility bill be sent to the supplier through this bill ready process.
Staff proposes that supplier will provide utilities with information to the utility regarding what was sent by the utility to print on the supplier’s bill. However, an alternative proposal would provide that suppliers will provide electronic bill view access to utilities to see the entire customer bill with a supplier. Suppliers have opposed providing to the utilities bill view access to the supply-related parts of an SCB citing competitive concerns, and propose limiting utilities to viewing the delivery portion of the SCB
In terms of the customers eligible for SCB, Staff proposes that supplier may enroll whatever customer with which they contract. With the customer’s consent, the supplier may obtain through pre-enrollment information the following: (1) whether the customer has an arrearage; (2) the age of the arrearage by age bucket (0 – 30 days, 30 – 60 days, >60 days); and (3) whether the customer is on a payment arrangement with the utility.
In contrast, the working group proposes that a supplier cannot enroll a customer in SCB who has arrearages older than 30 days and cannot enroll customers on payment arrangements. The supplier will send an enrollment transaction, and the supplier will receive a notification that the customer is either eligible or not eligible with a reason transaction from the utility.
"It is Staff’s position that the SCBWG’s approach restricts the customer’s ability to choose a supplier and hinders the suppliers’ business choices. It is Staff’s position that restricting access to retail choice is contrary to statute, which makes retail choice open to all citizens where it is available in the customer’s service territory. As an alternative, Staff recommends that additional pre-enrollment information be provided to the supplier about customer arrears to allow the supplier to decide whether it wants to take on the financial risk of each specific customer. This approach should produce similar results to a customer eligibility requirement since suppliers are likely to avoid customers with payment problems. This approach allows a supplier to evaluate its own risk tolerance with selecting a customer while being consistent with the law," Staff said
Some members of the SCBWG have proposed the possibility of a Phase II to first run SCB without customers who have energy assistance to determine what the issues are with the SCB program. Energy Assistance customers can be more vulnerable to service termination and parties also want to ensure a customer’s energy assistance is not jeopardized through participation in SCB. Staff is not supportive at this time of limiting EA customers from participating in the SCB program, but does agree that additional work is needed to develop EA processes before implementation. How EA is developed will be impacted by decisions the Commission makes for SCB regulations such as customer eligibility, budget billing, bundled vs. unbundled charges, and payment arrangements. Staff has proposed basic COMAR requirements that should be the basis of energy assistance but allow for flexibility to ensure Energy Assistance is appropriately deployed.
Under the proposal, call center metrics will be reported annually to the Commission for the first three years a supplier has a license, and then every three years after that. To the extent metrics are not being met the supplier will provide a description of why they did not meet the standard and provide a corrective action plan if necessary.
Under the proposal, SCB call centers will follow the same reporting metrics that utilities follow today
Suppliers have indicated that they likely use call centers not unique to Maryland so the metrics might not align with the metrics required under COMAR and therefore do not support regulations that require them to report Maryland specific metrics. This would likely require suppliers to have Maryland specific phone numbers and may be costly for established suppliers who would have to change their phone number with all current customers.
With regard to budget billing, Staff proposes that the utility may provide a customer a budget bill on SCB
Suppliers oppose this because they want the ability to budget the customer’s charges. Suppliers are also concerned with budgeting already previously budgeted charges. Utilities oppose Staff’s proposal and prefer to be paid actual charges.
With regards to bill inserts, utilities will send or provide bill inserts to customers. COMAR has been written such that bill inserts will be provided by suppliers if so directed by the Commission. Suppliers have committed to providing all Commission required bill inserts, but the suppliers oppose providing other mailings that a utility sends that is not Commission-mandated. Suppliers want to ensure that however bill inserts are distributed, it is uniform across the State otherwise it would be more expensive for them to operate.
The proposal does not address cost recovery for SCB implementation
"When the issue of cost recovery has been discussed ideas have included having the suppliers pay for the program or some form of cost sharing depending upon overall program costs," the proposal states
The proposal would provide that suppliers will not be restricted to providing a single billing option and that a supplier may offer customers UCB, Dual, and SCB contracts if the supplier is licensed to do so.
Staff renewed its request that the PSC re-examine the existing UCB-POR mechanism given adoption of SCB, since better-paying customers may be cherry-picked and negatively impact suppliers using UCB-POR
Staff said, "The Commission in its Order implementing SCB stated it does 'not intend to reconsider its Utility POR program at this time' when denying a request by OPC to do so. Staff is requesting that the Commission reconsider this position since Staff is concerned that SCB may have detrimental impacts to the UCB and potentially SOS and SS programs. Today under UCB, SOS, and SS uncollected commodity costs are socialized among all ratepayers on the service. Under SCB a supplier will have every incentive to procure only good paying customers since the supplier will bear the risk of payment-troubled customers, which is not so in the UCB market. As suppliers sign up more customers for SCB, there will be fewer good paying customers in
UCB, over which to socialize uncollected costs which would lead to higher discount rates or surcharges for these programs that would become weighted toward payment-troubled customers."
Staff proposes the Commission direct a work group be formed to study and propose new structures for collection of costs in UCB, SOS, and SS that would not be impacted by SCB suppliers being incentivized to enroll only good paying customers. Staff has not proposed changes at this time since alternative structures have not been studied thoroughly, and suppliers who are not planning to participate in SCB should have an opportunity to provide feedback to structural changes to their programs.
See the narrative proposal, proposed regulations, and business operation plans for SCB at the links below: