Maryland Staff Recommend 70% Cut in Filed POR Discount Rate for Washington Gas Light

Staff of the Maryland PSC have recommended that the Commission adopt a four-year amortization of IT implementation costs related to Washington Gas Light purchase of receivables, which results in the updated discount rate for residential receivables being cut by 70% versus the filed updated rate.

Specifically, the four-year amortization of IT costs which Staff supports results in an updated residential POR discount rate of 2.02%, and a non-residential discount rate of 0.03%.

Under the currently effective POR calculation, which reflects a two-year amortization of IT costs, the reset discount rates at WGL would be 6.97% for residential receivables, and 0.17% for non-residential receivables.

The four-year amortization had first been formally proposed by the Maryland Energy Marketers Coalition as a solution to the untenable 6.97% discount rate.

"After fully reviewing the Company's filing, and conducting further discussions with both the Company and competitive gas suppliers, Staff concludes that using a full four-year amortization period for IT implementation costs is both reasonable and appropriate," Staff said.

"This lower rate will encourage more supplier participation in the WGL Maryland service territory. The Company has informed Staff that it is amenable to this proposal. Staff supports this longer amortization period for IT implementation costs," Staff said.

Staff also noted that there is an outstanding issue in the POR program regarding the application of late payment revenues collected by WGL.

When approving the initial POR discount rates, the PSC directed WGL to keep track of the late payment fees but did not, at that time, order WGL to credit the late payment fees against the POR costs.

"With respect to the crediting of late payment fees, Staff supports the Company's request and the Commission decision last year not to require the crediting of late payment fees against POR-related costs. As the Commission is aware, the crediting of late payment fees by other utility companies in Maryland has contributed to these other utility companies developing POR discount factors that are negative. To obviate negative discount factors, the Commission has adopted a zero ('0') discount factor applicable to the POR rates in all of the utility decisions for those rate classes that are affected with derived negative discount rates," Staff noted.

Staff noted that this issue of negative discount rates has been assigned by the Commission to the Supplier Coordination Working Group (SCWG). "In the pendency of the effort by the SCWG, it would not be appropriate not to add to this problem by directing WGL to credit late payment revenues against POR revenues that will result in negative discount rates," Staff said.