Maine to End Laddered Default Service Supply Terms, Repudiates Purchase of Receivables

The Maine PUC has issued an order to end the use of multi-year, laddered default service supply procurements for residential customers.

Allowing for the previously procured laddered contracts to expire, laddering will be removed from the small customer default service portfolio in March 2016.

"With the increase in competitive providers serving the residential and small commercial classes in the CMP and BHE areas, it has become more important for standard offer prices to track the market, and products that allow customers to manage price volatility are likely to be available in the market. Accordingly, we will phase out the use of the staggered terms. We will move to yearly solicitations for the entire load for one year terms, rather than an every six month solicitation process as proposed by Electricity Maine. Annual solicitations will balance the need to maintain the residential and small commercial standard offer prices in line with market prices, while maintaining a greater level of rate stability and predictability than would occur with a six-month process," the PUC said.

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Specifically, the PUC said that it would combine all CMP and BHE standard offer load into one annual solicitation to minimize administrative and transaction costs, and to attract a more robust set of bidders.

Under this approach:

• Residential and Small Commercial Class: The PUC will phase out the staggered terms as the existing tranches expire and move to an annual solicitation for the entire class. At that point in time (March 2016), the PUC will allow bids for the load in 20% increments to increase bidder flexibility and lower prices.

• Medium Class: The PUC will conduct annual solicitations for fixed prices for twelve month terms in which prices may be different in each month.

• Large Class: The PUC will conduct annual solicitations for twelve month terms with rates indexed to market prices in a similar manner as the Commission's current practice for the large classes (with an indexed energy component plus capacity, a fixed adder, and an uncollectible adder).

The PUC said that it will reconsider moving to a six-month approach for small volume customers in the future if the competitive market continues to develop for residential and small commercial customers.

The PUC's order did not explicitly state whether Maine Public Service would see similar changes to its default service procurement as specifically cited for Central Maine Power and Bangor Hydro-Electric.

In other retail market matters considered in the case, the PUC flatly rejected the introduction of purchase of receivables.

"This [POR] approach would remove one important component of competition -- which is the management of customer creditworthiness, customer payments and uncollectible risk and, thus, would be contrary to the promotion of a competitive electricity market for residential and small commercial customers," the PUC said.

Retail suppliers (CEPs) said that they are placed at an unfair disadvantage without POR since the Standard Offer Provider (SOP) does not bear uncollectible risk, as the Standard Offer Provider is granted a fixed uncollectible adder amount that relieves the Standard Offer Provider of bad debt risk and transfers that risk to utility ratepayers.

However, the PUC said that, "an important consideration is the fact that, unlike CEPs, SOPs have no access to information about the identity or creditworthiness of their customers and must provide service to any and all customers that want to take standard offer. Therefore, SOPs cannot manage uncollectible risk in the same manner as competitive CEPs that know the identity of their customers and are not required to provide service to any customer. Exposing SOPs to actual bad debt risk rather than using the fixed uncollectible adder approach would increase the risk to SOPs which would likely translate into increased standard offer prices."

Regarding partial payment priority and payment plans, the PUC noted that statute provides that a transmission and distribution utility may not disconnect service to a consumer due to nonpayment of generation charges or any other dispute with a competitive electricity provider, other than an SOP, and therefore declined to make any changes to the partial payment priority and payment plan rules.

The PUC said that if CEP charges were placed before or prorated with SOP charges in the partial payment priority, it could lead to a customer's disconnection since the full amount of funds would not go to SOP charges, effectively violating statute.

Regarding payment plants, the PUC said, "requiring a T&D utility to establish a payment arrangement that is binding on the customer and the CEP effectively puts the T&D in the position of making business decisions for a CEP and removes the CEP's ability to make business choices best suited for its particular business model."

The PUC noted various issues regarding collection of deposits, and deposits for Standard Offer Service, but said that it would consider these issues in more detail in a future proceeding.

The PUC also announced its intention to reopen the customer protection rules to consider new protections, such as a prohibition on automatic renewals, click here for related story today

Docket 2013-00200