Utilities Say PSC Should End POR For All Residential Customers

People's Counsel Urges PSC To Use Emergency Authority To Repeal POR Entirely

August 2, 2024

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Reporting by Paul Ring • ring@energychoicematters.com

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The Maryland PSC has been asked to use its emergency authority to repeal its existing purchase of receivables (POR) rules in an expedited manner

The request was made by the Office of People's Counsel (OPC) as OPC and other parties filed briefs concerning the impact of new statutory language prohibiting residential POR (PC 65)

Separately, Baltimore Gas and Electric, Pepco, Delmarva, Southern Maryland Electric Cooperative, Washington Gas Light, and Potomac Edison (the "Joint Utilities") said in joint comments that the PSC should not implement dual payment allocation methodologies that would be required if POR were permitted for existing residential contracts, but prohibited for new and renewed contracts as of January 1, 2025 due to SB 1.

The Joint Utilities said that the transition from POR to an alternative payment allocation methodology should occur at, "a single point in time", for all residential accounts. Although the Joint Utilities did not specifically list a date for such transition from POR, given the statutory prohibition on residential POR for new and renewed contracts as of January 1, 2025, the Joint Utilities are necessarily opposing the continued use of POR for existing contracts

Recently adopted SB 1 provides that the residential POR prohibition applies to contracts entered into or renewed on or after January 1, 2025

There appears to be no dispute among stakeholders that SB 1's statutory language provides that existing retail energy contracts are not subject to the statutory residential POR prohibition

However, OPC said that POR was adopted by the PSC as a policy choice, and that the PSC has authority to terminate POR altogether, including for existing residential contracts not covered by SB 1

OPC observed that the utilities do not know whether a customer is on an existing or renewed contract, and said that the prohibition on POR for renewed contracts would be difficult to enforce

OPC said that the only way utilities could be assured of satisfying their compliance obligation under SB1 -- to not purchase residential receivables for renewed contracts -- would be to implement, on an accelerated basis, a system and obligation for retail suppliers to report to the utilities the end date for each current customer's contractual term

OPC said that allowing POR for existing contracts would require the PSC to devote considerable resources to regulating and policing the continued use of POR for these grandfathered residential contracts

As such, OPC recommended that the PSC, on an "expedited" basis, "entirely repeal" the current POR regulations such that the utilities will, "have no POR obligations as of January 1, 2025."

Although OPC's recommendation came in the context of the residential POR prohibition, nothing in OPC's text itself, in this instance, specifically limited OPC's recommendation to ending POR for residential customers only.

OPC was more narrow in a concluding recommendation, stating that, "the Commission should move as quickly as possible to repeal its existing POR regulations for all residential customer choice accounts by January 1, 2025."

OPC urged the PSC to consider using the "emergency provisions" of the State Administrative Procedures Act (SAPA) to repeal POR, as OPC cited the limited timeframe before January 1, 2025

Though OPC conceded SB1's language does not prohibit POR for existing contracts, OPC also claimed that the "apparent intent" of the General Assembly was to end the use of POR effective December 31, 2024.

The Joint Utilities agreed that the PSC has authority, outside of SB1, to terminate POR

The Joint Utilities cited the challenges and expense from continuing POR for existing contracts. The Joint Utilities noted, as OPC did, that the utilities do not know a customer's contract status as being either existing or renewed.

Additionally, the Joint Utilities said that maintaining two different payment allocation mechanisms will "greatly complicate" efforts to implement SB 1 while increasing implementation costs

PSC Staff did not make a recommendation on whether, as a policy, POR should continue for existing contracts, but observed that, "POR is a right conferred by the Commission by virtue of its authority to promulgate regulations."

"The Commission could eliminate POR for residential contracts altogether, provided it has a legally sound basis for doing so," PSC Staff said, noting that a rulemaking would be required to accomplish such

However, Staff said that, in the absence of Commission action repealing the current POR rules, the utilities are required to continue POR for existing contracts, notwithstanding any technical challenges

Staff said, "Pre-existing enrollments should retain POR functionality until those contracts end or are renewed, or until the Commission makes a factual determination that it is advisable to eliminate POR for all residential retail supply contracts, and takes the steps necessary to modify its regulations."

Staff said, "Staff recognizes that the grandfathering of POR may represent a technical hurdle for utilities in a way that a single POR expiration would not. However, given the language of the law, it is clear that the law does not require pre-deadline contracts to be subject to the prohibition of POR."

The PSC had requested briefs by August 2 on the question of, "whether the POR prohibition of SB 1 should apply to all residential retail choice accounts or only those residential retail choice accounts that have agreements entered into or renewed after January 1, 2025." [emphasis added]

Comments discussed above concerning the PSC's own authority to end POR were not sought under the August 2 briefing (though such issue, and the treatment of receivables still eligible for POR, is being discussed at large in the PC65 proceeding)

As such, briefs filed by retail suppliers focused on what appears to be the undisputed position that SB1's residential POR prohibition does not apply to existing contracts, and did not materially address the policy question of the PSC acting on its own authority to end POR

Still, joint comments from the Retail Energy Supply Association (RESA), CleanChoice Energy, Inc. and NRG Energy, Inc. (referred to by ECM as the Supplier Parties) addressing grandfathering are equally applicable if the prohibition on POR for existing contracts were executed by PSC order, rather than statute

The Supplier Parties said that, "Retaining POR for grandfathered residential customer contracts will minimize market disruptions to customers, utilities, and suppliers."

"Given the immense implementation challenges that the Commission, Staff, utilities, suppliers, and other stakeholders face to work through these issues, forcing an immediate stop to POR for all residential customers would be a huge mistake," the Supplier Parties said

"Forcing the retail supply industry to a new billing paradigm that has not yet been developed all at once on January 1, 2025, would be a disaster. Customers would either get dropped or could begin receiving two bills for their electricity – one from the utility for regulated charges and one from their supplier for the supply service. No matter how hard the Commission, utilities, and suppliers work over the next few months to prepare, that transition would result in a tidal wave of customer inquiries, complaints, and general confusion about being forced into a new billing paradigm, or being reversed slammed back to utility service when their supplier is no longer able to serve them under the POR billing arrangements in place today," the Supplier Parties said

The Supplier Parties also raised Constitutional concerns (Contracts Clause) about impacting existing contracts if POR were terminated for all residential customers

While focus has been on the supplier-customer contract, the Supplier Parties noted that a retail supplier using POR is also a party to a billing services agreement with the utility

"BGE’s BSA includes a provision that the BSA remain in effect for as long as the supplier uses BGE’s consolidated billing services and complies with the tariff. Ending the residential POR program would substantially impair suppliers’ existing BSA rights," the Supplier Parties said

PC 65

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