POR to be Implemented at Peoples Natural Gas Under Settlement

A settlement in Peoples Natural Gas' rate case would approve, generally as proposed, Peoples' Purchase of Receivables program (R-2010-2201702).

The proposed POR program was first reported in Matters (11/3)

Under the settlement, Peoples Natural Gas would purchase receivables at a discount rate equal to the write-off factor used to derive the Merchant Function Charge, plus a temporary administrative cost component.

Although several suppliers expressed concern with the high discount rates at Peoples (due to its high uncollectibles rate), and had recommended using base rates to recover POR costs, the suppliers ultimately joined the settlement which recovers POR costs through a discount rate.

The settlement agreement itself was not immediately available. As originally filed, the write-off factor rate for residential customer receivables was 3.58%. The write-off factor for commercial and industrial customer receivables was 0.74%. The administrative cost component was 0.1086%, and would be eliminated once actual costs of establishing the POR program are recovered. It is not clear if any of these percentages have been updated to reflect new data (or will be by the time POR commences).

The settlement provides that Peoples, for a period of five years, shall provide any party a current calculation of Peoples' experienced uncollectibles expense percentage by class. "This should enhance [suppliers'] available knowledge base from which to assess the reasonableness of the Company's POR discount rate," Direct Energy said in a statement of support.

POR is to be available to suppliers effective January 1, 2012. As with other Pennsylvania POR programs, the program will only cover receivables related to basic gas supply, which will not include carbon offset products.

Consistent with the POR program, Peoples will unbundle the gas cost portion of bad debt cost through the creation of a Merchant Function Charge. The Merchant Function Charge (MFC) will remove the cost of uncollectible expenses applicable to Peoples' current gas cost rates from delivery charges, and apply it to the Price to Compare.

The settlement also formalizes Peoples' obligation to remove all required natural gas procurement costs from base rates and recover such costs through the bypassable Price to Compare. These adjustments will be made through Peoples' compliance filing in Rulemaking L-2008-2069114.

The stipulation would further implement a process to assign on-system storage capacity to NP-1 competitive suppliers, based upon the amount of load they serve, at no additional charge.

During the case, competitive suppliers had argued that competitive supply NP-1 customers were paying for storage costs through distribution rates, but not receiving access or benefits from that storage.

Settling parties have also agreed to permit transfers of balances between NP-1 pools and Priority-1 pools, providing greater flexibility to suppliers that serve customers in both classes. The provision should also help reduce imbalance charges.

Under the settlement, Peoples has agreed to work with suppliers to offer new billing and pricing options as it implements its new billing system. Peoples shall also develop a customer education plan which shall include choice education, to be launched in the fall of 2011.

Peoples will apply $3 million in excess revenue from its producer enhancements services to reduce loss and unaccounted for gas on its gathering facilities.