District of Columbia Affirms POR Discount to Reflect Late Payment Revenues

The District of Columbia PSC affirmed that Pepco's purchase of receivables program shall credit late payment revenues associated with purchased receivables as an offset under the discount rate calculation, as the PSC denied various rehearing requests of its prior POR order.

The PSC directed Pepco to implement the POR program within nine months from the date of the Commission's order denying rehearing issued Friday.

As first reported by Matters, the PSC had originally ordered that revenues from late payment fees associated with purchased receivables shall be included in the discount rate as an offset to uncollectibles.

Pepco had sought rehearing to eliminate late payment revenues as a component of the discount rate, or, alternatively, for an order finding that the discount rate shall never be negative regardless of the operation of the calculation.

The PSC denied both these requests.

"Negative Discount Rates could occur if the approved discount rates for each class of customer are initially too high and cause Pepco to over-collect its POR program costs for the applicable POR year," the PSC noted.

"Our objective is to have a POR program with a properly designed Discount Rate and a Reconciliation Component that will ensure that Pepco collects all of its costs, but only from the Suppliers whose receivables have been purchased. We also want to ensure that we have a program where Suppliers are not over-charged or under-charged for the POR program that they will fully fund because there is a viable Reconciliation Component. Finally, we want to ensure that the POR program does not inadvertently cause SOS customers or distribution customers to subsidize Suppliers' customers," the PSC said.

The PSC said that it will review the POR program's performance and its reconciliation of costs following the first year after implementation to decide whether any adjustment to the Discount Rate computation is required to meet these program objectives. Therefore, Pepco must track and report to the Commission all revenues and costs associated with the POR program at the end of its first year of operation.

"In conclusion, the Commission reiterates that the purpose of the POR program is to encourage electricity competition in the District by encouraging Suppliers to participate in the electricity market. As we stated in Order No. 16916, the POR program should be self-contained, and include all of the costs that will be incurred by the utility in running the program. Given that design, the POR program should include all revenues, including late payment fee revenues, and all costs, including the cost of collecting late payments. With a properly designed Discount Rate and Reconciliation Component, Pepco will be able to collect all of its costs associated with the purchase of the receivables of the Suppliers' customers from the Suppliers with no subsidy from the distribution customers or the SOS customers," the PSC said.

The PSC also denied Washington Gas Energy Services, Inc.'s rehearing request which had sought to include early termination fees as a commodity charge included in the purchased receivables. The PSC maintained that early termination fees are to be excluded from purchased receivables.

The PSC also denied WGES' alternative request that Pepco be directed to modify its billing system to allow an early termination fee to be placed on consolidated bills but excluded as a Pepco receivable.

FC 1085