Duquesne Light Seeks to Increase Residential POR Discount on All Suppliers to Fund Referral Program

Duquesne Light has proposed increasing the Purchase of Receivables discount rate to all retail electric suppliers serving residential customers to recover costs of its proposed Standard Offer customer referral program, which is part of its proposed default service plan for the period beginning June 1, 2013 (see earlier story for details on the referral program).

While in a summary of its proposal Duquesne Light had said that it proposed to recover the Standard Offer referral program costs through the discount rate; its statement was unclear as to whether such incremental costs would be recovered through an additional discount applicable only to suppliers participating in the referral program, or to all suppliers regardless of participation.

Now that supporting testimony has been made available, it has become clear that Duquesne Light is seeking to raise the residential POR discount rate applicable to all retail suppliers to recover costs of the referral program, regardless of a supplier's participation in the referral program.

Specifically, a redlined tariff included with Duquesne Light's testimony providers that the residential customer POR discount rate shall be 1.52%, comprised of 0.42% for uncollectible expenses, 0.10% for incremental ongoing operating and administrative expenses related to these customers, and 1.0% for costs of any EGS referral program in effect during the effective period of the POR program.

The 1.0% discount component for the EGS referral program is based on estimated costs, and may change in a subsequent compliance filing based upon final costs of the program.

Other than the incremental 1.0% discount charge for the referral program, the residential POR discount rate is unchanged from the current rate of 0.52%.

Duquesne Light said that it proposed recovering Standard Offer referral program costs through the POR discount rate applicable to all suppliers because, "[t]he Company is concerned that there may be no winning EGS or that EGSs may decline to bid if they are required to absorb the entire cost incurred by the Company to implement the program."

"Recovering the costs through the POR administrative discount will result in a smaller adjustment across all EGSs supplying the residential customer class segment. Also, Standard Offer Program suppliers could potentially enter and exit the program during the course of the program, making it more difficult to allocate costs over time," Duquesne Light said.

The residential discount will be adjusted to remove recovery of EGS referral program costs once all costs have been fully recovered.

As previously reported, Duquesne Light would create a new, distinct small C&I POR class, so that small C&I receivables are not discounted to reflect the residential customer referral program (currently, residential and small C&I receivables are bundled into a single class). The small C&I discount rate would be set at 0.52%, the current level of the bundled residential/small C&I discount (0.42% uncollectibles, 0.10% ongoing administrative costs)

The medium C&I discount rate would be unchanged at 0.28%, comprised of 0.18% for uncollectible expenses and 0.10% for ongoing administrative expenses.

The discount rates may be adjusted during the term of the POR program. Unlike under the current POR program, where adjustments were limited to twice during 29 month period (February 2012 and February 2013), the redlined tariff does not include any limit on the number or schedule of adjustments. The tariff only provides that suppliers will be provided with any updated discount rate 60 days before the effective date of the discount rate change.