PSC Adopts Mechanism For Cost Recovery Of Supplier Consolidated Billing Implementation Costs

Directs That SCB Implementation Shall Proceed

June 27, 2023

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Maryland PSC today issued an order on the cost allocation for implementation and related costs under supplier consolidated billing (SCB)

The Commission directed that cost recovery shall be shared between ratepayers and retail suppliers participating in SCB pursuant to Option 5 discussed in the SCB workgroup (WG) request.

Option 5 requires that costs are recovered first from ratepayers, through either base rates or a surcharge to ensure timely cost recovery.

During this recovery period, SCB suppliers are to pay a dollar-per-SCB-bill fee (the PSC decided against use of a POR discount), which is to accrue back to the ratepayers. Carrying costs are to also accrue back to ratepayers.

The Commission specifically found that a dollar-per-bill fee should be charged to suppliers using SCB (rather than using a POR discount), and the PSC said that, "the amount should be sufficient to ensure repayment to ratepayers over a reasonable period of time, and not so much as to risk imposing a barrier to entry."

In an ordering paragraph, the PSC specifically adopted a $2.00 per bill fee for suppliers using SCB, under Option 5

"The Commission observes that a higher dollar per bill fee does not necessarily equate to a faster payback, given that a higher fee could dissuade suppliers and customers from participating," the PSC said

The PSC further said in a footnote on this point, "Here, Commissioner Linton concurs with the majority that the work group should propose a range for the SCB fee, but for those discussions would not offer a floor or ceiling at this time."

The PSC said that further specifics of Option 5 should be analyzed and refined by the SCB WG.

With regard to the Joint Exelon Utilities’ request that the Commission make a determination as to whether the implementation of SCB is to be delayed or halted, "the Commission directs the parties to proceed with implementation of SCB."

"Similarly, the Commission finds that Deca’s proposal to make significant program design changes and pursue alternative options would create excessive delays in SCB implementation," the PSC said

"Nevertheless, the Commission encourages parties to continue searching for ways to lower costs," the PSC said

"This Order does not address prudency, which is an issue that is appropriately addressed in the context of a rate case. Related issues such as whether portions of the utilities’ claimed SCB implementation costs may include embedded costs currently in rates or are instead incremental costs directly related to the changes necessary to implement SCB, are also better left for inquiry in a future rate case.," the PSC said

Concerning the adopted initial allocation of costs to ratepayers, the PSC noted that energy assistance customers likely won't be able to participate in choice after July 1, unless a supplier offers a PSC-approved plan

"Several parties observed that low-income customers will not have the choice of selecting SCB or competitive supply after July 1, 2023, as a result of newly enacted legislation codified in PUA § 4-308. The Commission observes, however, that no party presented any method for shielding low-income customers from SCB costs, other than choosing a cost recovery option that imposes all of the costs on suppliers," the PSC said

"The Commission will remain receptive to hearing SCB WG recommendations on this [low-income customer] issue," the PSC said

Use of Option 5 means that non-SCB suppliers won't bear any impact of SCB costs

"The Commission finds that Option 5 best balances the principles of cost causation, avoidance of barriers to entry, and full and timely recovery of utility costs. Customers will pay SCB implementation costs upfront, which will ensure that utilities are made whole for their investments and will also prevent the imposition of overwhelming costs to a nascent SCB industry. Suppliers, however, will be required to repay customers over time, which will meet the principle of cost causation. It is true that this option presents only a pathway to full recovery and not a guarantee, and that the timing of repayment may raise some intergenerational concerns. Overall, however, the Commission finds this alternative is the best option," the PSC said

"Ultimately, the Commission finds unpersuasive the suppliers’ argument that all costs should be imposed on ratepayers, since that position lies in contravention of the principle of cost causation. As OPC and the utilities assert, SCB suppliers will be the primary beneficiaries of the SCB rollout. They are also the parties who asked for the authority to offer SCB, and it is the implementation of SCB that is causing Maryland utilities to incur significant costs to make the service possible," the PSC said

"Nevertheless, the Commission does not agree with parties who suggest that suppliers will be the only beneficiaries of SCB. Petitioners correctly point out that the Maryland General Assembly created the obligation to implement competitive billing as part of restructuring mandated by the Electric Customer Choice and Competition Act of 1999. That Act envisioned that competition, including through competitive billing, would benefit customers by creating competitive retail markets for electricity supply and services, expanding consumer options, and potentially lowering prices. Still, the fact that the General Assembly mandated competitive billing does not lead inevitably to the conclusion that the legislature intended ratepayers to fund it, or that ratepayers are the cost causers. To the contrary, the Customer Choice and Competition Act is silent on the issue of cost recovery options for competitive billing," the PSC said

"Regarding the principle of avoiding barriers to entry, the Commission finds unworkable cost recovery options that require suppliers to pay all SCB implementation costs within the five-year period needed for utility reimbursement," the PSC said

Case 9461

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