|
|
|
|
|
PSC Orders Changes To Purchase Of Receivables Design, Endorses Use of Multiple Discount Rates To Be Based On Each Retail Supplier's Own Uncollectibles
The following story is brought free of charge to readers by VertexOne, the exclusive EDI provider of EnergyChoiceMatters.com
The District of Columbia PSC has ordered immediate changes to the design of the residential purchase of receivables (POR) programs at Pepco and Washington Gas Light, and also generally endorsed design changes to be addressed after further investigation
All changes in this story relate solely to residential POR, with the exception of the potential introduction of a POR administrative adder discount rate (whose applicability to various customer classes will be further studied). The PSC found that no changes to non-residential POR are needed at this time
Specifically, while not adopting a final policy at this time, the PSC generally embraced the use of multiple discount rates for residential POR, to be based on the uncollectibles of a retail supplier's customers
Due to logistic and implementation cost concerns cited by the utilities, the PSC agreed that implementing unique POR discounts for each specific retail supplier is not appropriate
However, the PSC said that implementing a tiered approach to POR discounts, with multiple tiers, would address concerns about implementation costs while also addressing suppliers whose customers have excessively high uncollectibles which are socialized among other POR customers (and, if unrecovered under POR, potentially SOS customers)
The PSC specifically directed Staff to investigate creation of 3 POR discount tiers: a top-tier, a middle-tier, and a bottom-tier.
Staff is to convene a technical conference within 120 days on tiered POR discount rates
The technical conference discussions
shall include, but are not limited to:
(1) What are the challenges to implementing a multi-tiered
discount rate?
(2) What changes are necessary to Pepco and WGL’s billing system in order to
implement a multi-tiered discount rate?
(3) What are the cost implications for implementing a
multi-tiered discount rate?
(4) What is the optimal number of tiers under a multi-tier framework?
(5) What is the timeline for implementation of the multi-tiered discount rate?
(6) What is the nature
and frequency of reports that Pepco and WGL should provide?
The PSC reported that, among retail suppliers with
residential customers, the retail supplier with the lowest customer arrearage rate was
approximately 20 times lower than that of the retail suppliers with the highest arrearage rate,
"which underscores the need for a multi-tiered rate structure."
"[T]he Commission generally agrees ... that the
discount rate should be designed to capture the default rate disparity between suppliers," the PSC said
"It is not
unreasonable to request that certain third-party suppliers pay a higher discount rate if their
customers have a higher default rate than those of the majority of other third-party suppliers," the PSC said
"The
Commission believes that a higher discount rate for certain third-party suppliers can encourage
more equitable practices, thereby reducing the likelihood of default," the PSC said
"By implementing a multi-tiered discount rate
structure, the Commission incents third-party suppliers to manage risks more proactively by
maintaining a responsibly screened portfolio that will allow access to the appropriate discount tier.
In addition, this approach would be less burdensome than a supplier-specific discount rate, while
adhering to the principles of cost causation," the PSC said
While not adopting a final policy, the PSC said that a proposal for the use of an administrative adder in the POR discount rate has merit, as a means to capture incremental costs of collection
The PSC said neither WGL nor Pepco provided detailed information to
evaluate and quantify the calculation of such an adder.
As such, the PSC set the matter of the POR admin. adder for a technical conference, to be held within 60 days
The administrative adder technical conference shall address, among other things:
(1) Whether expressing the adder as a per-bill fee is
more favorable than expressing as a percentage of receivables;
(2) Incremental costs the Adder
will cover;
(3) Incremental costs the adder will not cover;
(4) How a reconciliation mechanism to
account for the adder will work.
A joint
technical conference report must also include recommendations on the administrative adder, the
customer classes subject to the administrative adder, the calculation method, and a timeline for
implementing the administrative adder, as applicable.
In terms of design changes adopted by the PSC, the PSC has ordered that the bad debt expense under the POR program shall be amortized over 3 years
This amortization addresses, in part, the previously reported high residential POR discount rates due to uncollectibles balances stemming from COVID-related termination moratoriums
The PSC said, "the Commission must choose between a shorter
amortization period that provides a lower reduction of the POR discount rate versus a longer amortization period that provides a higher reduction to the POR discount rate, but carries a higher
recovery risk. The Commission approves an amortization period of three (3) years because it
strikes the correct balance between providing noticeable cost relief to the existing POR discount
rate calculation and minimizing the recovery risk."
The PSC stressed that, "We will continue to monitor and evaluate the
bad debt expense and amortization period to determine if further adjustments are needed."
The PSC also considered whether late payment fees received by the utilities from late-paying POR customers should continue to be used as an offset to POR bad debt, with the PSC ruling that revenues from late payment fees should continue to be reflected in the POR discount rate as an offset
PEPPOR-2026-01, WGPOR-2026-01
ADVERTISEMENT Copyright 2026 EnergyChoiceMatters.com. Unauthorized copying, retransmission, or republication
prohibited. You are not permitted to copy any work or text of EnergyChoiceMatters.com without the separate and express written consent of EnergyChoiceMatters.com
June 12, 2026
Email This Story
Copyright 2026 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
NEW Jobs on RetailEnergyJobs.com:
• Refreshed 5/27/26 -- Manager, ISO Coordination (electricity), Retail Supplier
• NEW -- Channel Partner Manager -- Retail Energy
|
|
|
|
|