Shock: Washington Gas Light POR Discount Rate to Near 7%

Washington Gas Light has filed updated purchase of receivables discount rates with the Maryland PSC, and the new residential rate, as calculated under the current tariff, would be nearly 7%.

Specifically, WGL is seeking POR discount rates as follows:

Residential: 6.97%

Non-residential: 0.17%

For comparison, WGL's current discount rates applicable to the purchase of residential and non-residential receivables are 4.39% and 0.83%, respectively.

The increase in the proposed updated POR discount rates is due to an increase in the Information Technology (IT) Implementation Cost component, WGL said.

WGL noted that while the PSC previously established a two-year amortization period for IT implementation costs, if the PSC were to adopt a mid-course adjustment and allow amortization over three years, the new POR discount rates would be 3.26% for residential customers, and 0.07% for non-residential customers.

WGL's final IT implementation costs related to POR and other RM35 retail programs are $3.3 million. This represents an increase of approximately $685,000 from the estimated IT implementation costs included in the company's December 21, 2010 filing.

The IT implementation costs continue to be allocated between the residential and non-residential rate classes based on the company's average customer bills allocator (94% to residential and 6% to non-residential). Due to lower competitive supplier commodity sales during the initial year of purchasing receivables as a result of both lower throughput due to the warmer-than-normal winter and lower gas costs, the IT implementation costs collected through the POR discount rate over the first year of the program were substantially lower than initially estimated. The balance of the total IT implementation costs remaining to be collected is $2.6 million.

The specific POR discount rate components are proposed as follows:

Residential
Bad Debt                                    0.02%
IT Implementation (2 Year Amortization)     7.44%
Incremental Collection Costs                0.07%
Reconciliation Factor                      (0.55%)
Total:                                      6.97%

Non-Residential
Bad Debt                                    0.01%
IT Implementation (2 Year Amortization)     0.20%
Incremental Collection Costs                0.01%
Reconciliation Factor                      (0.06%)
Total:                                      0.17%

Data reflects rounding

Washington Gas Light collected in $529,000 in late payment fees associated with purchased receivables during the initial term of the POR program. WGL proposes to retain the late payment charges, and not use them to offset POR costs, "as the rationale for late payment fees is to compensate the Company for the costs associated with late payments," WGL said.

WGL requested that the Commission approve the proposed updated POR discount rates as soon as possible. Following approval by the Commission, the company must implement the new POR discount rates on the first day of a bill cycle. WGL said that it will endeavor to implement the new POR discount rates for the next bill cycle following approval, but notes that it will need a minimum of 15 business days to update and test the revised POR discount rates before they go "live."