OPC, Utilities Oppose Inclusion of Termination Fees in Purchased Receivables

"Under no circumstance," should competitive supplier early termination fees be included in purchased electric or gas receivables, the Maryland Office of People's Counsel said in comments to the PSC.

As only noted in Matters, the PSC is investigating whether early termination fees may be properly included in purchased receivables (6/1).

POR is limited to commodity charges. PSC Staff has characterized the termination fees as contractual fees and not a direct charge for the commodity being supplied by the retail provider.

"Receivables purchased by distribution utilities from gas or electric suppliers should include solely the cost of the commodity. Under generally accepted definitions of 'commodity,' purchase of receivables should be limited to the cost of either the electricity or gas supply. The definition of commodity should never include items such as termination fees, deposits, late fees, penalties, cancellation fees, or the cost of any other product or service," OPC said.

Baltimore Gas & Electric, the Pepco Holdings utilities, and Columbia Gas also argued that termination fees are not commodity charges.

Early termination fees are, "contractual obligations [that] should be enforced by the retail supplier and not by the electric utility," the Pepco companies said.

Retail suppliers filing comments were unanimous in arguing that the termination fees are commodity charges.

Explaining the role of early termination fees in mitigating the risk of forward supply purchases undertaken to serve customers, Washington Gas Energy Services said, "[i]f the buyer breaches or otherwise prematurely terminates the contract to select another supplier, the fee operates as a commodity charge for the untaken volumes as partial compensation to the supplier [for] the supplier's upstream commitment."

The National Energy Marketers Association agreed, but also noted that the PSC may wish to explore whether limits to early termination fees in POR programs are necessary. "A requirement for reasonable ETFs [early termination fees] associated with charges billed in a POR program may be appropriate in this regard," NEM said. The Maryland Energy Marketers Coalition similarly said that the Commission may deem it prudent to place a limit on the maximum level of supplier early termination fees for residential customers, and said that the coalition, "would welcome that discussion."

In their discussion of how the termination fees are an axiomatic commodity charge, no supplier cited any POR program is another jurisdiction in which such fees are included in the purchased receivables.