Consumer Advocates Petition PSC To End Purchase of Receivables -- EnergyChoiceMatters.com

Consumer Advocates Petition PSC To End Purchase of Receivables, Seek Rulemaking

June 2, 2023

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Reporting by Paul Ring • ring@energychoicematters.com

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The Maryland Energy Advocates Coalition (Advocates) filed a petition at the Maryland PSC requesting that the PSC initiate a rulemaking to eliminate the purchase of receivables program at the electric and gas utilities in the state

Parties joining the Advocates' petition include, among others, AARP Maryland, Climate Access Fund, Institute for Energy and Environmental Research, Maryland Legislative Coalition Climate Justice Wing, and the National Consumer Law Center. The Office of People's Counsel does not appear as a signatory

Although the Advocates' petition averred that draft rule changes were attached to the petition, the version of the petition available through the PSC's online docket site did not include such draft rule changes, as of publication time, potentially due to a system error (a signatory letter appears to have been filed twice)

However, the Advocates' described their sought rule changes as follows:

"For retail energy suppliers using utility consolidated billing (UCB), the proposed revision would eliminate the Purchase of Receivables ('POR') option from the Commission’s regulations governing the relationships between regulated electric and gas utilities and retail energy suppliers in Maryland. As revised, this means that the regulated utilities would prorate the customer bill payments between the utility distribution charges and the supplier energy charges. If a customer does not pay the entire bill, the utility would have the right to terminate utility service for non-payment of the utility charges.in [sic] accordance with Commission regulation."

The Advocates said, "This Petition provides an opportunity for the Commission to assess the initial purpose and unintended adverse consequences for residential consumers of providing this Purchase of Receivables option and proposes a resolution. The Purchase of Receivables option is no longer needed to 'level the playing field' between the retail energy supply services offered by regulated utilities and licensed retail energy suppliers. More importantly, the POR option has provided an incentive for retail energy suppliers to engage in deceptive marketing practices that result in residential customers paying excessive rates for retail energy supply – both gas and electric. It is time to reassess again the use of POR and eliminate this option that has benefited suppliers and acted as a detriment to residential customers."

The Advocates said, "Furthermore, retail suppliers, who are 'trying to do the right thing' and follow Maryland consumer protection law, are placed at a competitive disadvantage. This is not good for a truly competitive retail supply market that should deliver economic benefits to residential customers."

The Advocates said, "Retail energy supplier contract prices are higher than SOS prices, in the aggregate, and with most, if not all, retail suppliers."

The Advocates said, "The most vulnerable customers are paying the highest prices of all. These include low and moderate income households, and those with seniors, people of color, immigrants, and non-English speaking household members."

The Advocates said, "POR has removed a routine business risk from retail energy suppliers operating in Maryland (and elsewhere) and provided an incentive to rapidly sign-up customers."

The Advocates said, "POR may also be the reason that most suppliers charge their customers variable rates which can be changed with each invoice. In response to the extremely high rates and arrearages during the 2013-2014 polar vortex and consumer concerns about supplier behavior in the marketplace, the Commission adopted more stringent regulations in 2016 through RM54. However, the Commission declined to require affirmative consent from the customer to each change from a fixed to a variable rate. Unless a customer has the time, energy and expertise to examine and compare monthly supplier pricing on their bills, the likelihood is that customers have no clue as to rising supplier rates. If they did, why would they continue to pay such excessive rates?"

The Advocates said, "The evidence in Maryland, and elsewhere, shows engagement in widespread deceptive marketing practices and pricing discrimination. The result is that Maryland residential customers are paying rates far more than regulated utility supply rates, without most customers knowing it. Zip code and demographic data also confirms that the resulting excessive rates are paid by customers least able to afford such high rates - households with low and moderate incomes."

"In the case of POR and retail energy suppliers, the no-risk bill payment and lack of debt collection costs enhance the likelihood of risk taking when it comes to marketing and enrolling customers. The result is clear: Residential customers of retail suppliers as a whole pay more for energy supply, and the most vulnerable customers are at the highest risk of paying these excessive rates," the Advocates said

Citing U.S. Department of Energy (DOE) data, the Advocates said that customers on retail supply paid $640 million more than SOS during the period 2014-2021, including $117 million more in 2021

"We contend that today the retail energy industry is mature enough to handle its own credit risk, not Maryland’s ratepayers," the Advocates said, citing the size and revenues of retail suppliers

The Advocates said that, "Today, the residential retail energy market, in both Maryland and other retail competition states, is powered by three publicly traded Fortune 500 energy corporations – NRG Energy, Vistra Energy and Constellation. In addition, even some of Maryland’s smaller retail suppliers have significant nationwide electricity revenues."

Citing DOE data, the Advocates reported six retail suppliers with Maryland electricity revenues exceeding $15 million in 2021, including Constellation Energy at $122 million and NRG Energy at $89 million

The Advocates further said that POR is no longer needed to level the playing field since the pre-POR residential market share of electric suppliers was about 5%, and suppliers' market share now stands at 15% (off from a high of 26% circa 2013). Electric suppliers were serving under 100,000 residential customers prior to POR, and now serve about 350,000 customers

The Advocates said, "Energy Advocates Coalition also believes that the Commission’s consideration of this proposal is timely. The Commission currently has several related regulatory dockets under consideration, including Supplier’s Consolidated Billing and Community Choice Aggregation plus possible future programs like Community Solar billing. The proposed elimination of POR in the retail supply market can be considered in relation to these other programs."

As noted, the specific language of the rule changes that the Advocates seek to adopt was not immediately available

The petition itself does not discuss whether the termination of POR would apply to the supplier of a Community Choice Aggregation (CCA)

Additionally, the petition devotes several pages to supplier charges in excess of SOS, but none of the Advocates appeared at a recent rulemaking in support of a proposed regulation that would prohibit a CCA from charging energy assistance customers in excess of the SOS rate

The petition also states, "The discount rate for BGE residential gas and electric customers has been set at 0% since 2019," and that, "The bottom line is that electric and gas utilities purchase the suppliers’ receivables, based upon the suppliers’ rates charged to individual customers and at a discount rate (currently 0 for BGE)."

BGE's residential electric POR discount was 0.7129% for the 2022-23 period, and was updated to 0.6591% on June 1

BGE's residential gas POR discount was 0.2238% for the 2022-23 period, and was updated to 0.8225% on June 1

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