Utility Seeks To Maintain Current POR Discount Rates, Saying Change Under Normal Formula Would Result In Higher Than Normal Payments To Retail Suppliers Due To Shut-off Moratoriums -- EnergyChoiceMatters.com

Utility Seeks To Maintain Current POR Discount Rates, Saying Change Under Normal Formula Would Result In Higher Than Normal Payments To Retail Suppliers Due To Shut-off Moratoriums

Another Utility Files Negative POR Discount Rate For Residential Service

March 16, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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Nstar (Eversource) has filed with the Massachusetts DPU proposed purchase of receivables discount rates (standard complete billing percentages) to be effective May 1, 2021, with Nstar seeking to maintain the current level of POR discount rates because it says that a shut-off moratorium would otherwise artificially increase payments to retail suppliers under POR under the current discount calculation methodology.

Nstar said that, "due to the novel coronavirus ('COVID-19') pandemic the most recent 12-month period is not reflective of normal economic conditions, and therefore the Company proposes to continue utilizing the Department-approved Standard Complete Billing Percentage ('SCBP') from D.P.U. 20-POR-02, rather than the SCBP as calculated based on the most recent 12-month period. This approach is consistent with the Terms and Conditions, and would help alleviate the issues outlined below."

"The moratorium on shut-off activities over the past year has resulted in an artificially low SCBP driven by the Company’s inability to shut-off customers and subsequently write-off bad debt associated with those customers. The significantly lower uncollectibles expense based on write-offs and 2021 SCBP are not reflective of the current economic conditions," Nstar said

As normally calculated, the 2021 SCBP would result in higher than normal payments to competitive suppliers for the purchase of their receivables beginning on May 1, 2021, Nstar said

Specifically, Nstar said that, absent its proposed alternative of maintaining the current POR discounts, the current POR calculation would result in the following POR discounts beginning May 1, 2021:

Nstar - East & West, 
Standard Calculation (Not Proposed)
              Residential  Commercial  Industrial
Total            0.45%       0.28%       0.08%

For comparison, the current Nstar Massachusetts POR discounts, which Nstar proposes to maintain for the period beginning May 1, 2021, are:

Nstar - East & West
Current & Proposed, May 1, 2021
              Residential  Commercial  Industrial
Total            1.69%       0.24%       0.11%

"[D]ue to the economic conditions caused by the pandemic, the Company is anticipating a significant increase in write-offs and uncollectibles expense once shut-off activity resumes, which will result in much lower payments to competitive suppliers over the next few years. Rather than experience these large fluctuations in SCBP payments to competitive suppliers, the Company requests that the Department mitigate the anticipated volatility in the POR discount rate resulting from the COVID-19 pandemic by using the Purchase of Receivables ('POR') Discount Rate currently in effect as approved in D.P.U. 20-POR-02, subject to future reconciliation," Nstar said

The rates remain subject to DPU approval.

National Grid

National Grid in Massachusetts has filed new proposed purchase of receivables discount rates (standard complete billing percentages) to be effective May 1, 2021.

Under National Grid's filing, the residential POR discount rate would become negative, at -0.05%, versus the current rate of 3.11%

However, like Nstar, National Grid noted that pandemic-related shut-off moratorium has impacted the POR discounts rates. Rather than proposing a specific different level for the discounts versus the standard calculations, National Grid merely told the DPU that it is open to alternative approaches

"This year’s Purchase of Receivables filing reflects the impact of the Covid-19 Pandemic starting in early 2020. The Pandemic hit Massachusetts beginning in mid-February and the Commonwealth’s state of emergency went into effect on March 10, 2020. Due to the Department’s moratorium on termination of utility service, which still is in effect today for residential customers, the Company has not terminated service to electric residential customers. Therefore, the Company has not charged off customer accounts receivable to the same extent that is has in prior years, since it is not charging off active accounts as a result of nonpayment. As a result of the significant decline in bad debt expense from not terminating service for nonpayment and because the UPs in effect during calendar year 2020 were based on prior year bad debt costs that were unaffected by the Covid-19 Pandemic termination moratorium, the Company over-discounted accounts receivables purchased from competitive suppliers during calendar year 2020. While this filing is consistent with the formula provided in its tariffs, M.D.P.U. Nos. 1420 and 1421, § 8B, the Company would consider an alternative approach to setting the SBCP if the Department determines that the unique circumstances presented by the Covid-19 Pandemic warrant an alternate approach," National Grid said

The proposed May 1, 2021 National Grid Massachusetts POR discounts are:

              Residential  Commercial  Industrial
Uncollectible    1.24%       0.86%       0.14%
Admin Cost       0.00%       0.00%       0.00%
Reconciliation  -1.29%      -0.09%       0.07%
Total           -0.05%       0.77%       0.21%

For comparison, the current National Grid Massachusetts POR discounts are:

              Residential  Commercial  Industrial
Uncollectible    2.63%       1.06%       0.09%
Admin Cost       0.00%       0.00%       0.00%
Reconciliation   0.48%       0.29%       0.03%
Total            3.11%       1.35%       0.12%

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