Massachusetts DPU Rules Suppliers Must Take POR if Using Complete Billing, Confirms Class-Specific Discounts

The Massachusetts DPU has ruled that retail suppliers cannot use utility consolidated billing without participating in the forthcoming purchase of receivables programs, and also affirmed that POR discount rates shall be class specific, in an interlocutory order and order on clarification (DPU 10-53).

The previously adopted POR model terms and conditions used class-specific uncollectible rates in the POR discount.

As utilities submitted compliance filings to conform their tariffs to the model terms and conditions, Dominion Retail sought the use of a blended POR discount rate because, except at National Grid, the basic service bad debt rate is based on a weighted average of the uncollectible expense of all customer classes combined, and is not class-specific. Dominion Retail expressed concern that the class-specific POR bad debt rate for residential customers will be higher than the blended basic service bad debt rate, leading to non-competitive offers from retail suppliers and an unworkable residential market.

However, the DPU found that the statutory language requiring POR does not permit the use of a blended POR bad debt rate but, rather, requires the use of class-specific bad debt rates.

Furthermore, the DPU found that the statute does not permit suppliers who have chosen the utility consolidated billing option to opt out of the POR program.

The DPU noted that the statute requires that, "[f]or electric suppliers who have chosen the complete [utility consolidated] billing method, the electric distribution company shall make timely payments to such suppliers in accordance with this paragraph," with the remainder of the paragraph outlining the basics of the POR program.

"There is no ambiguity in these words and no justification in this context for reading 'shall' as anything other than mandatory," the DPU said.

"This language leaves no room for a distribution company to pay suppliers who are using the complete billing method in any other manner [aside from POR], and leaves no room for those suppliers to receive payment in any other manner," the DPU said.

The desire by some suppliers to use utility consolidated billing while not using POR was heightened as a means of mitigating any disparity between the POR uncollectibles rate and basic service uncollectibles rate.

The DPU declined to establish a common method for the calculation of POR bad debt rates and basic service bad debt rates at this time; however, the DPU said that it will consider in a future proceeding RESA's suggestion to address the parity issue by implementing class-specific bad debt rates for basic service.

The DPU also clarified that, "it makes sense to have all the POR costs addressed within the context of the POR program, rather than in any other rate proceeding or mechanism."

Therefore, the Department clarified that "Administrative Costs" include those costs that the utilities incur in establishing the POR program, including the filings made and served pursuant to D.P.U. 10-53-A. The Attorney General had sought clarification that the costs of various informational and compliance filings made by the utilities as required by the DPU were considered administrative costs to be recovered under the POR program.

With the interlocutory issues addressed, the DPU ordered that the Massachusetts Electric Company and Nantucket Electric Company d/b/a National Grid, NSTAR Electric Company, Fitchburg Gas and Electric Light Company d/b/a Unitil, and Western Massachusetts Electric Company, "shall implement the purchase of receivables program in accordance with the Model Terms and Conditions issued in the D.P.U. 10-53-A Order."

Furthermore, the DPU ordered that each utility, "shall report to the Department within 30 days of the date of this Order on the progress in resolving issues with the parties relating to the supplier service agreements."