Retail Supplier Seeks Collaborative to Design POR at AEP Ohio

Interstate Gas Supply, Inc. has requested that PUCO direct Ohio Power Company to, "establish a collaborative to design and implement a purchase of receivables ('POR') program for residential and small commercial customers in Ohio Power's service territory."

IGS Energy's request came in testimony concerning the state compensation mechanism for capacity provided by AEP Ohio to competitive retail electric service (CRES) providers. "[I]f AEP's [higher] capacity charges are ultimately approved, CRES providers' collection risk will also increase. A POR program would mitigate some of the adverse impact that AEP's proposed rate increases will have on CRES suppliers and their customers," IGS Energy said.

"A POR program is consistent with the state policy set forth in R.C. 4928.02 to encourage competition, in that such a program would encourage more competitive retail electric service ('CRES') suppliers to offer service in the AEP service territory. A POR program would reduce CRES providers' billing and receivables costs, which would translate into savings for CRES customers. The implementation of a POR program should not be difficult for AEP, as there is ample precedent for these programs among other Ohio utilities," IGS Energy said.

"AEP has systems, labor and IT resources in place to manage all aspects of the billing and collections process. It is also familiar with the consumer protection protocols related to collecting outstanding receivables. The costs of all of these resources are paid for by customers in the distribution rates charged by AEP. Requiring each CRES supplier to provide these systems and resources creates unnecessary duplication that is ultimately paid for by customers. Customers pay distribution rates regardless of whether they shop. To the extent distribution rates reflect the cost of systems and resources necessary for collections, shopping customers will pay these costs again if the CRES provider has to maintain its own systems and resources to duplicate the same function. Also, because AEP has the ability to terminate service -- and CRES providers do not -- AEP is better-positioned to collect on delinquent accounts," IGS Energy said.

IGS Energy noted that Duke Energy Ohio is the only electric utility in Ohio that offers a POR program. Nearly 30% of Duke's residential electric customers are shopping, which, unlike other areas of Ohio, largely represents non-aggregation load.

IGS Energy also noted that POR is in place at the major natural gas distribution companies in Ohio.