Competitive Supplier: Purchase of Receivables the "Sub-Prime Mortgage" Equivalent for Utilities

A competitive supplier has compared Purchase of Receivables to sub-prime mortgages.

In an official blog posting discussing a PUC review of POR in New Hampshire, Freedom Energy Logistics noted that:

"A working group for the Ovide Lamontagne gubernatorial campaign puts it this way, 'POR is little more than the 'sub-prime mortgage' equivalent of utility prices; it allows companies to sell energy to consumers whose credit ratings, or payment histories, have shown them to be poor risks for payment. Energy suppliers sell, or 'factor', these customers' accounts to regulated utilities who, in turn, collect them as an equivalent stranded cost."

"So, the 'competitive' supplier gets paid, albeit at some figure less than it billed, the utility becomes the bill collector to the 'competitive' energy supplier's deadbeat customers, and the loyal customer who pays their own bills sees their electricity rates rise even further through stranded costs subsidized on their backs," the blog post says.

Freedom Energy Logistics' blog further states:

"When testifying in Maryland for a required POR, part of RESA's argument rested on the elimination of costly credit checks undertaken by competitive suppliers to ensure that potential customers they planned to take from incumbent utilities could actually pay their energy bills. Since ratepayers who in fact paid their bills would have to pick up the tab for their less creditworthy brethren, POR would – wait for it – encourage suppliers 'to market to all of the utility's customers, not just those with the most favorable credit and bill payment histories.'" [emphasis by Freedom Energy Logistics]

"FEL sister company Resident Power (RP) believes customers receive goods or services because they can pay for them. To that end, RP currently performs such 'costly credit checks' and it has had to turn down some prospective customers in New Hampshire because their credit history did not stand up to scrutiny. That's the way wise business is conducted."

Additionally, Sean Devine, a Freedom Energy Logistics employee, said on a radio show in June that POR would increase costs to ratepayers.

Furthermore, in discussing the results of POR, Devine offered the following:

Devine: So if you look at the Connecticut Department of Public Utilities website. You look at the list of suppliers that are down there serving residential customers.

Radio Host Rich Girard: Ok

Devine: 40 of them long. All posting different prices every day. It's a mess. It's an absolute mess. Now, some may look down on that and say, 'Ahh that, that looks like it's working,' but now it's created a situation where the standard offer, you know, has gone so high, from the utilities and --

Girard: Now this is a result of them becoming a purchase of receivables state you're saying?

Devine: No I am saying this would be the result, this would be the result of it.

Despite its public position with respect to POR, Freedom Energy Logistics is not a party to the PUC POR proceeding, nor is sister company Resident Power. Another sister company of Freedom Energy Logistics, PNE Energy Supply LLC, is a party to the PUC POR proceeding [which is also addressing other retail issues], but said that it does not wish to take a position in the proceeding with respect to POR, and did not address POR in its initial testimony.