Maryland Energy Marketers Coalition Offers Proposal to Prevent Spike in WGL POR Discount to 7%

The Maryland Energy Marketers Coalition (MEMC) has filed a proposal with the Maryland PSC to prevent a spike in the Washington Gas Light residential purchase of receivables discount rate to 7%, as MEMC cautioned that if POR implementation costs are not handled in a reasonable manner, "the consequences for the competitive marketplace can be severe," citing the elimination of the choice program at Columbia Gas due to implementation costs.

As only reported by Matters, WGL's current formula for updating the POR discount rate would result in a residential discount rate of 6.97%. This calculation reflects a two-year amortization of IT implementation costs related to POR and other RM35 retail programs.

MEMC noted, however, that two significant factors have changed since the PSC adopted a two-year amortization: (1) natural gas receivables have been significantly lower than projected due to lower market pricing and lower volumes due to mild weather and (2) IT implementation costs have risen 26% from original estimates.

MEMC specifically proposed the following:

(1) WGL provides confirmation to the PSC that no additional IT implementation costs will need to be incurred by the company, beyond ongoing maintenance charges; and

(2) The amortization schedule for the IT implementation costs be extended an additional two years, resulting in a four-year schedule overall.

MEMC's extension of amortization would result in a discount rate for residential receivables of 2.01%.

The resulting non-residential discount rate would be 0.05%, versus the 0.17% resulting from the currently approved calculation methodology.

"The MEMC believes this approach would ensure that WGL is made whole in a reasonable amount of time without incurring the additional cost of extending the amortization. At the same time, by bringing the POR discount rate for residential customers in line with what is commercially viable, a strong choice program in WGL's territory will be preserved. A four-year amortization schedule will also reduce the skewing impact of IT implementation costs and bring the discount rate much closer to the utility's actual bad debt experience, which, as WGL notes in its August 31, 2012 filing, is minimal at this time," MEMC said.