OPC Suggests Proration of Partial Payments at Columbia Gas to Address Costs of Choice Program

Changing the treatment of uncollectibles at Columbia Gas of Maryland from a Purchase of Receivables program to the proration of partial payments appears to be the best option for addressing choice implementation costs at Columbia, the Office of People's Counsel said in comments.

As only noted in Matters (3/30), Columbia has proposed ending its choice program due to the high implementation costs of complying with COMAR 20.59, and the limited amount of customers participating in choice from which to recover costs. PSC Staff has opposed Columbia's request, suggesting that costs be recovered from all choice-eligible customers to address the problem (4/22).

OPC, however, warned that allowing the costs of retail market enhancements (such as POR, standard electronic transactions, etc.) to be recovered from all choice-eligible customers at Columbia would invite Baltimore Gas & Electric and Washington Gas Light to seek similar treatment. At BGE and WGL, choice implementation costs are being recovered through POR discount rates, consistent with the PSC's earlier determination that customers not participating in choice shall not pay choice-related costs.

While OPC opposes a broad allocation of choice-related costs to all choice-eligible customers, OPC also opposed Columbia's proposal to completely end the choice program. "To grandfather the existing customers until their contracts expire, and then return them to the utility's supply service would be to close off a portion of Maryland's utility customers from utility supply choice, which would be contrary to the General Assembly's support of customer choice for electricity and gas supply services," OPC said.

Still, OPC recognized that the practical impact of the costs of the choice program, "appears to limit the number of utilities that may participate [statewide], simply from the point that an unknown critical mass of customers and perhaps suppliers is required to support such a program from the required process changes a company must undertake to become amenable to Choice customers and suppliers. That does not seem to have been the case for Columbia."

OPC said that one of the alternatives presented by Columbia -- maintaining choice but with proration of partial payments rather than POR -- appears to be the best option. Under this scenario, supplier receivables would not be purchased by Columbia. Instead, any customer payments short of the amount owed would be prorated among supplier and distribution charges (versus the old payment order of distribution charges first, followed by supplier charges).

The proration option, which would include the other requirements of COMAR 20.59, would include $316,723 in implementation costs plus monthly maintenance and administration costs that vary between $11,683 and $23,367, to operate the existing choice program.

OPC noted that the proration option still leaves the question of from which customers to recover such costs. Under a five-year amortization, recovery of the implementation costs would equal $6.84 per month per customer participating in choice (based on current migration levels), or $0.16 per month per choice-eligible customer.