RESA Seeks Rulemaking for Non-Recourse Purchase of Receivables in New Jersey

The Retail Energy Supply Association has petitioned the New Jersey Board of Public Utilities to implement a rulemaking proceeding to adopt a rule requiring each Electric Distribution Company (EDC) and Gas Public Utility (GPU) to institute a non-recourse purchase of receivables program that does not revert customers to dual billing when in arrears.

Under current rules, a distribution company is required to purchase a third party supplier's (TPS) receivables, but if the customer is in arrears for 60 days (120 days at some gas utilities), the customer becomes ineligible for POR, and the utility requires that the customer take dual billing from their retail supplier. Furthermore, once placed on dual billing, the customer must remain on dual billing for at least 12 months.

The Board had instituted a working group on POR, but the workgroup concluded in March 2011 without a consensus, with Board Staff stating that the next step would be the institution of a formal proceeding at the Board concerning POR. Since that time, no formal proceeding has been opened, nor has any resolution been reached through ongoing informal discussion among retail suppliers, the rate counsel, and other parties.

RESA noted that no additional working group meetings have been scheduled, nor has Board Staff issued any other documents regarding how it plans to address updating the current 60-Day recourse POR Program.

RESA is specifically requesting that the Board adopt a new rule requiring that each EDC and GPU shall make consolidated billing services available to all customer classes, and that each EDC and GPU shall purchase all of the TPS accounts receivable for all TPSs to which it provides consolidated billing services.

The rule would require that each EDC and GPU shall make consolidated billing services with POR available to all customers until such time that the EDC or GPU would be authorized to disconnect the customer for non-payment pursuant to existing rules and regulations pertaining to utility service termination, with EDCs and GPUs permitted to terminate a customer for non-payment of TPS charges in the same manner as they may do so for utility charges.

RESA's proposed rule allows for an "appropriate" discount rate for purchased receivables consisting of an:

1. Implementation Cost Component, which shall be reset to zero once the EDC or GPU has fully recovered its initial Implementation Costs; and

2. Uncollectible Cost Component, which shall be separate for each customer class and shall be updated by an EDC or GPU based on its Historic Uncollectible Accounts Cost Level no more frequently than once every twelve months after receiving Board approval of the updated Uncollectible Cost Component.

Each EDC and GPU would be required to calculate a separate discount rate for each customer class and shall be entitled to update each discount rate no more frequently than once every 12 months

For electric service, RESA would define the customer classes as residential customers, non-residential BGS-FP customers, and BGS-CIEP customers. For natural gas service, RESA would define customer classes as residential customers, commercial customers, and industrial customers.

Purchased receivables under RESA's sought POR program would include receivables for "retail electricity supply," defined as, "the product provided to customers by an electric TPS, including generation, transmission, renewable energy attributes, and related services," and receivables for "retail gas supply," defined as, "the product provided to customers by a TPS of gas."

Under RESA's proposed rule, each EDC and GPU must provide Budget Billing to TPS customers under the same terms and conditions that it provides Budget Billing to its own customers. For TPS customers using Budget Billing, an EDC or GPU shall be required to remit monthly payment to the TPS for the actual cost of the retail electricity supply or retail gas supply provided to the customer.

RESA said that the existing 60-day recourse POR program, "unnecessarily harms customers in several ways."

"First, it denies some customers access to competitive options currently available in the New Jersey electricity market. Second, it creates a negative experience and perception for customers just learning about competitive electricity markets. Third, it dampens further development of the competitive market by reducing the number of suppliers that are willing to participate in the market, especially for residential and small commercial customers," RESA said.

RESA particularly noted that the amount for which the customer is in arrears is not taken into account in the mandatory drop to dual billing.

"For example, if a customer has a bill for $68.01, and mistakenly sends in a check for $68.00, the customer is in arrears. If the same customer, the following month, receives a bill for $68.02, and issues a check to PSE&G for $68.00, that customer is dropped to Dual Billing. PSE&G treats that customer as delinquent for the entire 60 days, removes that customer from Consolidated Billing and then prohibits that customer from utilizing Consolidated Billing for one year. Most TPSs who serve residential and smaller commercial customers depend on utilizing Consolidated Billing. For these customer segments, Dual Billing is not feasible and is largely cost prohibitive for TPSs. Thus, with no ability to Dual Bill customers who are removed from Consolidated Billing, many TPSs are forced to drop customers back to BGS or BGGS - an outcome that neither the customer nor the TPS wants," RESA said.

"Even more troubling, the process of dropping a customer to Dual Billing and subsequently dropping them back to BGS or BGGS creates significant confusion for customers who have made the choice to switch to a TPS for service, have signed contracts with TPSs, and have the expectation that they will receive a single bill for commodity charges and delivery service. The current 60-Day electric and 120-Day gas Recourse POR Programs essentially set up customers to be whipsawed between BGS or BGGS and competitive supply and necessarily create a very negative experience for customers who have taken steps to participate in the competitive market - an outcome that is harmful to all market participants," RESA said.

"In addition, a Non-Recourse POR Program eliminates the need for TPSs to screen customers for credit eligibility, allowing customers with poor credit and repayment histories to switch to a TPS and potentially save on their electricity and gas costs. These customers are most in need of a means to lower their bills, and a Non-Recourse POR program allows TPSs to market to and service customers who would otherwise fail credit eligibility screenings," RESA said.