BGE Seeks to Temporarily Decrease Late Payment Charges, Affecting POR Discount

Baltimore Gas & Electric has asked the Maryland PSC to approve, on a temporary basis, lower late payment charge factors for electric and gas service, due to a transition to a new billing system.

The petition is noteworthy because revenue from late payment charges are a potential source of revenue to offset uncollectible amounts required to be collected under the Purchase of Receivables discount rate, though whether revenue from late payment charges is ultimately applied to offset the POR discount rate is still an open question year-to-year.

Under the current application of BGE's tariffs, Late Payment Charges (LPCs) are first assessed at 1.5% of the monthly bill, less applicable taxes and surcharges. An additional charge of 1.5% is applied to any total amount unpaid, less the previously assessed Late Payment Charge, at the time the next bill is rendered. A 2% charge is applied to any unpaid amount at the time the third successive bill is rendered. By rule, the total Late Payment Charges cannot exceed 5% on an overdue bill.

With the expected January 2012 transition to a new billing system, the application of the current Late Payment Charge factors to overdue bills from October, November and December 2011 is not possible, BGE said. "This is because the outstanding electric and gas charges that carry over into CC&B [the new billing system] will be total amounts. There will be no breakout of delivery charges, commodity charges, taxes or surcharges. The only breakout will be between electric charges, gas charges, and LPCs. As noted above, LPCs are assessed on the monthly bill less applicable taxes and surcharges."

"To compensate for this billing constraint during the short transition period, BGE is proposing to temporarily apply a set of derived LPC factors in the CC&B system to January, February and March 2012 bills for those October, November and December 2011 charges that are outstanding," BGE said.

Moreover, BGE said that the proposed transitional Late Payment Charge factors were developed such that customers will not pay more under these charges than they would have under the current Late Payment Charge methodology. "In fact, the proposed LPC factors yield charges that are significantly below those that would have been assessed utilizing the standard factors," BGE said.

To ensure that customers do not pay more under the temporary Late Payment Charge factors, BGE used a conservative set of assumptions which included, among other things, an assumption that, "there are no supplier commodity charges on the bill that would otherwise be subject to Late Payment Charge."

This assumes that the customer is on dual billing, and that the BGE bill only includes delivery charges. This assumption results in a lower Late Payment Charge Factor because, without supply charges on the bill, taxes and surcharges will comprise a higher percentage of the total bill.

For residential customers, the resulting Late Payment Charge percentages under BGE's conservative assumptions are 0.95% for Months 1 and 2, and 1.25% for Month 3.

For commercial customers, the resulting Late Payment Charge percentages under BGE's conservative assumptions are 0.15% for Months 1 and 2, and 0.20% for Month 3