PECO to Add Costs to Purchase of Receivables Discount as Part of Unbundling Compliance

PECO has informed the Pennsylvania PUC that it will propose to start, by April 2015, recovering additional costs through its natural gas Purchase of Receivables discount, including uncollectibles and administrative costs.

PECO's current gas POR discount rate only includes a temporary 1% discount for implementation costs. Uncollectibles, for both competitive supply and sales service customers, are recovered in base rates.

However, the adopted regulations regarding the unbundling of natural gas procurement costs provides that distribution companies are required to file a bypassable Merchant Function Charge (MFC) rider, and that the MFC rider, "must remove the cost of uncollectibles applicable to natural gas costs from its distribution rates and recover those annual costs as part of the PTC [Price to Compare] on a revenue neutral basis."

Moreover, the adopted regulations provide that a distribution company's POR program, "shall use a discount rate designed to reflect the NGDC's [distribution company's] actual uncollectible rate for supply service customers," plus any incremental implementation and administrative costs of the POR program.

Distribution companies with existing POR programs that did not have a defined term, such as PECO's, were given until April 14, 2015 to update their POR program to be consistent with the adopted regulations.

PECO proposes to revise, by April 14, 2015, its current gas POR discount provisions to comply with the adopted regulations which now require implementation of a POR discount to reflect the actual uncollectible rate and incremental costs associated with the development, implementation and administration of modifications to the POR program.

PECO will also develop bypassable Merchant Function Charges equal to the POR uncollectibles rates.

PECO noted that a prior Commission order concerning its POR program provided that, should unbundled uncollectibles and a Merchant Function Charge later be required by the PUC, PECO's $4.4 million in POR uncollectibles will be unbundled, converted to a percent-of-revenue by class (GR — 1.07%; GC — 0.30%) and recovered through an MFC and PECO will apply a corresponding discount to the receivables purchased from natural gas suppliers.

PECO also requested recovery of the incremental costs associated with the development, implementation and administration of the gas POR program. PECO has not yet quantified those costs.

"However, once determined, PECO requests that it be allowed to recover them in accordance with the Commission's Revised Final Order," which provides such costs shall be included in the discount rate.

In its filing, PECO also proposed the level of the new, bypassable Gas Procurement Charge (GPC), reflecting natural gas procurement costs formerly recovered in base rates.

PECO proposed to establish the bypassable Gas Procurement Charge at $0.0451 per Mcf. This amount will be included in the Price to Compare, along with the commodity charge, Gas Cost Adjustment, and (by April 2015 as noted above) the Merchant Function Charge.

The Gas Procurement Charge specifically reflects about $2 million in Labor and Benefits, Outside Legal Costs, IT-Related Gas Procurement Costs, and Working Capital.

The Gas Procurement Charge was calculated by taking the gas procurement costs of $2 million and dividing this figure by the projected default service volumes of about 44 million Mcfs for the period March 1, 2013 through February 28, 2014 for Rates GR, CAP, GC, OL, L, MV-F and the Excess Off-Peak Use Rider.

Because the GPC is not subject to reconciliation, PECO's gas procurement costs identified in the GPC will remain constant until its next distribution base rate proceeding. However, sales volumes and the subsequent GPC will change in conjunction with PGC rate adjustments.

Docket: P-2012-2328614