Maryland PSC Concludes "Some" Form of SOS Admin. Charge (Adder) Appropriate; Remands Case to Develop Record

Electric Standard Offer Service in Maryland should, "continue to include some form of Administrative Charge, in addition to the purchased power costs, transmission charges and taxes," the Maryland PSC concluded in reversing a proposed order from a hearing examiner, as the Commission remanded the issue to a Public Utility Law Judge for further development of a record to establish the appropriate SOS administrative charge at Pepco and Delmarva (Cases 9226 & 9232).

As currently structured, the SOS administrative charge, which is bypassable, includes a return component, an incremental cost component, an administrative adjustment, and an uncollectible component. Funds collected from the administrative adjustment on a bypassable basis are also credited to all distribution customers through an administrative credit on a nonbypassable basis.

At the time the case was opened, the admin charge was 4 mills/kWh at Pepco and Delmarva. Pepco and Delmarva were actually seeking an increase in the charges to reflect higher cash working capital costs.

However, as first reported by EnergyChoiceMatters.com in 2011, a proposed order from a hearing examiner would have eliminated the SOS administrative charge and return component, and ordered that SOS costs and revenues should be considered as part of the utilities' standard operations in their next distribution rate case.

The PSC reversed this finding from the hearing examiner.

"We reverse the Proposed Order because we do not agree that the Administrative Charge should be eliminated at this time and we further find that it would not be appropriate to consider SOS issues in the Companies' future rate cases," the PSC said.

"Rate cases involve the examination of many complex distribution rate issues within a statutorily prescribed time frame. The Commission finds that adding additional complex SOS issues would not promote the thorough analysis required to address either distribution rates or SOS issues appropriately," the PSC said.

The Commission noted that, "All of the parties concurred that the Companies are entitled to recover their incremental costs and uncollectible costs in the provision of SOS. Although there was substantial disagreement on how the return is to be calculated, or the form in which it is to be collected, all parties recognized that the Companies are entitled to a return in some form or another, whether that return is separately stated, included as part of the CWC requirement, or is considered within the overall context of the Companies' rate of return. Except for OPC, the parties' also recommended some form of Administrative Adjustment."

"Therefore, we conclude that there is no point to reinventing the wheel and that SOS should continue to include some form of Administrative Charge, in addition to the purchased power costs, transmission charges and taxes, which are not at issue in this case. However, we also conclude that, based upon our review, the record has not been sufficiently developed to finalize Delmarva's or Pepco's Administrative Charges," the PSC said.

Accordingly, the PSC remanded the issue of the level of the SOS Administrative Charges for Pepco and Delmarva to a Public Utility Law Judge. "We direct the parties to address and the PULJ to determine both the SOS incremental costs and uncollectible costs for Pepco and Delmarva and kWh rates to recover these costs. Since such costs should be readily ascertainable, we encourage the parties to seek consensus on these two Administrative Charge components," the PSC said.

"As for the return, we expect a record to be developed that will permit the PULJ to determine specific dollar and kWh rate figures. The PULJ shall also make a finding as to whether CWC should be included in the return requirement or whether the return and CWC should be separately stated. We specifically direct the Companies and invite other parties to provide evidence as to the ability to finance SOS cash working capital needs using short-term debt exclusively, and the cost of doing so. Furthermore, we want to make clear that, although financing SOS CWC at the Companies' overall distribution rate of return might be a reasonable outcome, such an outcome is not to be presumed and must be supported by the record," the PSC said.

"Finally, we do not make any findings at this time whether the Administrative Adjustment should remain part of the Administrative Charge, nor whether Staff's proposed Allocated Cost component should be adopted as part of the Administrative Adjustment or in lieu of it. We find that the record has not been sufficiently presented to make this determination at this time. We expect the PULJ to develop the record and to make a finding regarding the Administrative Adjustment component of the Administrative Charge," the PSC said.

Staff's Allocated Cost component was a proposed bypassable adder to SOS to reflect the costs of certain customer-service related functions undertaken by the utility to support SOS customers only. These costs included customer accounts expenses, billing expenses, credit and collection expenses, customer service expenses, and customer information expenses, and are currently recovered in nonbypassable distribution rates.

"In conclusion, we expect the PULJ to make a determination of the total Administrative Charge costs and rates for Pepco and Delmarva, broken down by the individual components, namely, incremental costs, uncollectible costs, return and CWC whether stated together or separately, and if appropriate an Administrative Adjustment," the PSC said.

In a similar case addressing the SOS Admin. Charge at Baltimore Gas & Electric, a hearing examiner had also recommended elimination of the SOS Admin. Charge. The PSC has not yet issued an order on the BGE proposed order.