Pa. PUC Approves Purchase of Receivables at Peoples Natural Gas

The Pennsylvania PUC has adopted without modification a settlement that will introduce Purchase of Receivables at Peoples Natural Gas.

The settlement, under which POR will be effective starting January 1, 2012, was first reported by Matters (4/13).

The POR discount rate will include a write-off factor and administrative cost component. The write-off factor for residential customer receivables is 3.58%, and the write-off factor for commercial and industrial customer receivables is 0.74%. The administrative cost component is 0.1086%, and would be eliminated once actual costs of establishing the POR program are recovered.

Consistent with the POR program, Peoples will unbundle the gas cost portion of bad debt 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.

While supporting the settlement, Commissioner James Cawley said that the settlement does not resolve several retail gas market barriers.

For example, Cawley said that the settlement does not address the overpayment of pool transfer fees by retail suppliers. Cawley noted that Peoples' projected costs for pooling service are $1.17 million, while pooling fee revenues are $2.28 million.

Cawley characterized the pooling fee as being market based, not cost based. "Using market-based charges provides a clear advantage/subsidy to sales customers, and enables utilities to arbitrage any potential profits from competitive businesses. It is also not clear why LGA [Local Gas Aggregation] pool transfer fees for off-system supply delivery were eliminated, while other pool transfer fees remained. This appears to be an unjustified example of rate discrimination," Cawley said.

Cawley further said that it is not clear that suppliers receive adequate gas storage access when they enroll new customers. "[Suppliers] argued that sales customers were able to utilize seasonal storage to reduce the cost of winter supplies, using capacity paid for by [supplier] service fees under the Banking, Balancing and Advancing Service (BBA Service). As part of the settlement, [suppliers] using NP-1 pooling service were allocated up to 1.55 Bcf of on-system storage capacity. However, NP-1 service is supported by approximately 3.8 Bcf of storage, of which 80-90% is used for seasonal arbitrage. While the settlement is a step in the right direction, it is likely that more needs to be done to reach more equitable levels of storage access, so that storage services truly are portable with the customer," Cawley said.

Cawley further called it "inequitable" to charge 15 cents per bill to suppliers for use of utility consolidated billing for "rate maintenance and billing support," when there is no such rate maintenance and billing support fee for sales service.

"Unless natural gas utilities want to fully unbundle billing services, I suggest that these types of [supplier] charges be removed henceforth if [supplier] rate discrimination is to be successfully resolved," Cawley said.

Additional details of the settlement, such as the assignment of on-system storage capacity to NP-1 competitive suppliers, and be found in our 4/13 story.