Utilities Float Withholding Amounts Due To All Retail Suppliers Under UCB To Pay For SCB (Change From Current SCB-Only Fee)

Utilities Seek Imposition Of Deadline For Retail Suppliers To Declare Intent To Use SCB

Utility: Dec. 2024 Start For SCB Not Possible Due Lack Of Supplier Testing

PSC Staff: "Logical" That Law Allows Continued Purchase Of Distribution Receivables Under Supplier Consolidated Billing

August 12, 2024

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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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In separate comments, several utilities and the Maryland Office of People's Counsel have raised to the Maryland PSC the potential for changing the recovery for implementation costs of Supplier Consolidated Billing (SCB), in light of retail market changes under SB 1 and whether SB 1's ban on residential purchase of receivables applies to the re-purchase of distribution receivables by the utility from a retail supplier under SCB

Under SCB, a supplier may require the utility to re-purchase distribution receivables to the extent the supplier was not successful in collecting them from the customer.

Parties filed briefs on whether SB1's residential POR prohibition impacts the current design of SCB, but also addressed cost recovery for SCB in light of SB 1 and changing market conditions

Currently, SCB costs will be recovered using a $2 fee imposed on retail suppliers per SCB bill issued, except that, until such time as SCB costs are paid off in this manner, costs will initially be recovered from ratepayers, with the per-bill SCB fee used to pay back ratepayers

Baltimore Gas and Electric Company, Potomac Electric Power Company, and Delmarva Power & Light Company (collectively, "the Exelon Utilities"), which as discussed further below believe that SB 1 prohibits residential POR as designed under SCB, said in comments that, if suppliers do not use SCB as a result of SB 1's POR prohibition, or other market restrictions under SB 1, ratepayers will pay for the entirety of SCB

To address this risk, the Exelon Utilities said that, "The Commission could certainly attempt to require all suppliers or a subset of suppliers to pay back ratepayers, such as the Petitioners whose specific request gave rise to Case No. 9461 [the SCB petition]." [emphasis added]

The Exelon Utilities said that the PSC could require the utilities, for retail suppliers or a subset or suppliers, to, "withhold half of the SCB costs through suppliers’ monthly invoices for other services such as utility consolidated billing."

In separate comments, OPC raised similar concerns on SCB cost recovery, suggesting that the PSC should reconsider its prior order under which ratepayers are assigned 100% costs of SCB costs upfront, with such amounts later repaid by use of SCB by suppliers under the per-bill fee

OPC said that the PSC should direct the SCB working group to develop alternative cost recovery mechanisms for SCB, with OPC specifically citing a mechanism that would impose a fee on, "all retail suppliers", not only those using SCB

The Exelon Utilities also recommended that the PSC establish a deadline by which suppliers must inform the PSC of whether the suppliers "intend" to use SCB.

The response from suppliers could inform the PSC's decision on whether to continue spending ratepayer funds on SCB implementation, the Exelon Utilities said

The Exelon Utilities alleged that none of the retail suppliers who petitioned the PSC to implement SCB (described by the Exelon Utilities as "NRG Energy, Inc., Interstate Gas Supply, Inc., Just Energy Group, Inc., Direct Energy Services, LLC and ENGIE Resources LLC") has come forward to assist with testing.

The Exelon Utilities averred that they are not aware of any supplier who has developed the necessary IT systems and EDI and XML transactions necessary for SCB

"What is more, no supplier has even been willing to commit to using SCB," the Exelon Utilities said

"After the Commission directed the utilities to continue implementation of SCB, the Exelon Utilities reached out to suppliers on July 18, 2024 -- including the Petitioners -- yet again to gauge interest in SCB and to obtain assistance with testing. To date, the Exelon Utilities have not received any supplier commitment," the Exelon Utilities said

The Exelon Utilities further reported that the PSC's Technical Staff has suspended the weekly EDI meetings, which are used to further finalize SCB transaction development, to instead focus on Public Conference 65 (the proceeding implementing SB 1's ban on POR)

"Utilities have been directed to implement SCB by December 2024 even though they have not been provided complete instructions on what to build. The cart has been placed before the horse," the Exelon Utilities said

In separate comments, Potomac Edison likewise said that it is not aware of any retail suppliers expressing interest in SCB after passage of SB1. Potomac Edison is not aware of any suppliers expressing interest in SCB testing

Potomac Edison said that a Dec. 31, 2024 implementation date for SCB, as previously ordered by the PSC, is no longer possible for PE due to the lack of supplier testing. At least 6 months is needed for supplier testing, Potomac Edison said

In separate comments, Washington Gas Light similarly said that the LDC, "is not aware of the intent of any suppliers that will be participating in the SCB program at this time."

Concerning SCB use by retail suppliers, NRG Energy, Inc.; Interstate Gas Supply, Inc. d/b/a IGS Energy; Just Energy Group, Inc.; ENGIE Resources LLC; Constellation NewEnergy, Inc.; Vistra Corp., and their respective retail affiliates (the SCB Petitioners) said in joint comments that, "SB1 has led to significant legislative and regulatory uncertainty, and until the dust settles and more answers become known, Petitioners cannot commit to an SCB testing schedule at this time."

The Retail Energy Supply Association said in separate comments concerning SCB implementation, "While the retail supply industry, including RESA members active in Maryland, remain committed to SCB in Maryland, the tremendous uncertainty created by SB1 is preventing suppliers from proceeding with the extensive testing regimes developed by the utilities to fully integrate systems for SCB. At this point, the retail supply community is still assessing options to continue operations in Maryland. If the Commission implements SB1 in a manner that enables suppliers to continue operating in Maryland, then SCB testing will be a top priority to enable customers to receive a single consolidated bill for their energy supply and distribution charges, as well as other related value-added product and service offerings."

Interpretation Of SB 1 POR Ban

§ 7-510(d)(4), as established by SB1, provides that, "A residential electricity supplier may not sell to an electric company, and an electric company may not purchase from the electricity supplier, accounts receivable."

However, the same subsection, at § 7-510(d)(1), provides that, "[t]his subsection applies to residential electricity supply."

The law includes similar language concerning retail natural gas

As previously reported, retail suppliers have argued that the provision, limiting the section in which the residential POR ban is contained to "electricity supply", means that the re-purchase of distribution receivables by utilities from retail suppliers under SCB is not prohibited nor impacted in any way under SB 1

The Exelon Utilities disagree with this interpretation

Upon their purchase by a retail supplier under SCB, distribution receivables, "will become supplier receivables," the Exelon Utilities argued

"[T]hose receivables will be owned by suppliers, they will appear on supplier’s books as assets, and suppliers will have the right to commence collection actions to recoup said receivables," the Exelon Utilities said

"Petitioners seek to make a distinction between receivables associated with distribution and receivables associated with supply; however, SB 1 makes no such distinction. Instead, SB 1 prohibits utilities from purchasing from residential suppliers 'accounts receivable,'" the Exelon Utilities said

OPC generally agrees that SB1 prohibits the re-purchase by the utility of any receivables from a supplier, including delivery receivables

However, Staff of the Maryland PSC believes that SB 1's prohibition on residential POR applies only to receivables originally generated from the sale of energy supply

Staff said that the POR prohibition under SB1 should be interpreted as applying based on, "the nature or perhaps the origin of the receivable, specifically to receivables which are derived from the sale of electricity supply services."

Staff said that, under this reading of SB 1, the ownership of the receivables is not relevant in determining whether the utility may purchase the receivable.

Staff further said that an interpretation, that allows utilities to purchase distribution receivables under SCB, is consistent with the overall goal of SB 1, which was consumer protection against unregulated rates. The distribution receivables purchased under SCB are set by the PSC and have been determined by the PSC to be just and reasonable, Staff noted

Thus, Staff does not believe that SB 1 prohibits a utility's purchase of distribution receivables from a supplier using SCB

Contrary to arguments from the Exelon Utilities, Staff said that the "more logical interpretation" of SB1 is that the residential POR ban applies only charges associated with energy supply (and not any receivables held by energy suppliers)

While Staff recommended its interpretation described above, Staff did note that, if the PSC were to interpret any receivable held by a retail supplier as being "supply" accounts receivable, then the PSC could conclude that SB1 prohibits the purchase of distribution receivables by a utility under SCB.

Furthermore, if the PSC finds that the purchase of residential distribution receivables by a utility from a supplier isn't prohibited under SB1, Staff said that the Commission "may" continue to allow such practice, if the Commission "so chooses", with Staff's language suggesting (but not explicitly stating) that the PSC could on its own authority end such practice under SCB (or end SCB altogether given changed circumstances under SB1)

As noted above, retail suppliers believe that SB1 does not prohibit the re-purchase of distribution receivables by a utility from a supplier under SCB, due to the language limiting the relevant subsection of SB1 to "supply". The position of retail suppliers was more fully discussed in our prior story from June

Case 9461

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