BGE Files New POR Discount Rates, Proposes Change to Calculation Methodology

Baltimore Gas & Electric has filed updated purchase of receivables discount rates with the Maryland PSC for both electric and natural gas service for the period starting July 1, and has recommended that the PSC modify the method for calculating the POR discount rate.

Five of the six discount rates for the electric and gas rate classes are negative, BGE said, largely due to the application of late payment charge revenue received by BGE as an offset to the POR discount rates. In past instances where the POR discount calculation has resulted in a negative discount rate, the PSC has set the POR discount rate to zero.

BGE presented three alternatives for the Commission's consideration to address the negative discount rates.

First, BGE submitted the discount rate calculation as computed with late payment revenues, in accordance with its current tariff. Consistent with PSC precedent, BGE proposes to reset any resulting negative discount rates to zero.

Second, BGE offers an alternative that removes late payment charge revenues from the discount rate calculation, prospectively, for the July 2012 to July 2013 period.

Finally, since BGE argues that late payment charges compensate a utility for credit and collections costs, BGE submits a calculation whereby the late payment charge revenues remain in the discount rate computation, but with a new a credit and collections component added to the discount rate to compensate BGE for those costs, since late payment charges benefit the suppliers through a reduction to the discount rate.

BGE recommends that the Commission adopt its second proposal whereby late payment charge revenues are removed from the discount rate calculation prospectively, "as suppliers never get paid late under the POR methodology, and the inclusion of [late payment] charges in the discount rate causes BGE's distribution rates to be inappropriately increased."

"While shopping customers are receiving a lower commodity rate from suppliers without the burden from the associated credit and collections costs, non-shopping customers are bearing the full credit and collections costs burden without any of the benefit provided by [late payment charge] revenues. This is by no means an equitable outcome for customers who have not selected an alternative energy provider," BGE said.

Proposed discount rates under each alternative are as follows. Under all three options, where a discount rate is negative, BGE proposes to set the discount rate to 0.000%, with the associated costs included in the future year's Reconciliation Component.

Option 1: Current Methodology
Electric:
Residential: (0.4063%)
Type I: (1.0379%)
Type II: 0.2669%
Hourly Priced Customers: (0.2512%)

Gas:
Residential: (1.0367%)
General Service: (0.1134%)


Option 2: Late Payment Charge Revenues Removed
Electric:
Residential: 0.3106%
Type I: (0.5445%)
Type II: 0.5161%
Hourly Priced Customers: (0.0850%)

Gas:
Residential: (0.2398%)
General Service: 0.1724%


Option 3: Credit/Collection Costs Included in Discount
Electric:
Residential: (0.0842%)
Type I: (0.8469)%
Type II: 0.5872%
Hourly Priced Customers: 0.0707%

Gas:
Residential: (0.2319%)
General Service: 0.4357%

Specific individual discount rate components (uncollectibles, late payment revenue, program development, customer lists, reconciliation, and under Option 3 credit and collections) under each scenario may be found in BGE's filing

For comparison, BGE's current POR discount rates are:
Electric:
Residential: 0.8234%
Type I: 1.4218%
Type II: 0.0000%
Hourly Priced Customers: 0.0000%

Gas:
Residential: 2.3962%
General Service: 0.0000%