PPL Proposes New Methodology to Set POR Discount Rate, Increase in Residential Rate

PPL Electric has filed with the Pennsylvania PUC a proposed mechanism to establish the purchase of receivables discount rate to reflect the unique uncollectibles experience of retail supply customers.

In PPL's most recent rate case, the PUC had ordered PPL to provide a breakdown of uncollectible accounts expense between shopping and non-shopping customers for purposes of establishing unique Purchase of Receivables discount percentage factors and bypassable Merchant Function Charges (MFCs) based on the actual uncollectibles of shopping and non-shopping customers, respectively.

"Because of the significant expense and time necessary to separately track the uncollectible accounts expense for shopping and non-shopping customers," PPL proposed a proxy to arrive at the unique uncollectibles experience of shopping and non-shopping customers. PPL noted that it is not aware of any other jurisdictional electric distribution company that is required to separately track and maintain its uncollectible accounts expense for shopping and non-shopping customers (indeed, at several EDCs, both shopping and non-shopping uncollectibles are recovered in base rates, rather than through a discount and MFC).

The proxy is described in more detail further below.

The bottom line is, however, that PPL's proxy indicates that the residential shopping and non-shopping uncollectibles experience is the same, and therefore, PPL proposes to set the residential POR discount and MFC at the same level.

Specifically, PPL proposes to set the residential POR discount and MFC at 2.23%. This is an increase from the current 1.85% POR discount, and reflects the more recent uncollectibles experience.

PPL's proxy indicates that the uncollectibles expense for small commercial and industrial customers on competitive supply is significantly smaller than the uncollectibles expense for small C&I customers on default service. Accordingly, PPL proposes to set the small C&I POR discount rate at a rate lower than the small C&I MFC.

Specifically, PPL proposes to set the small C&I POR discount at 0.12%, and proposes to set the small C&I MFC at 0.35%.

PPL's proxy uses overdue aged accounts receivable as an indicator of the breakdown of uncollectible accounts expense between shopping and non-shopping customers. Under this method, any unpaid accounts receivable that are 60 days or older are divided by the most recent 12-month total consolidated billings for that charge type (e.g. shopping versus non-shopping) and customer class.

PPL's proxy is the same method PPL uses to track an individual supplier's uncollectibles to determine if an individual supplier's discount rate should differ from the discount rate for the small C&I class.

Docket R-2012-2290597