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Maine PUC Opens Investigation of Central Maine Power Standard Offer Uncollectibles, Collection Practices

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October 20, 2010

The Maine PUC has initiated an investigation of Central Maine Power Company's credit and collection practices and how such practices and related accounting methods may have influenced CMP's Standard Offer-related uncollectible balances and write-offs (2010-327).  

In addition, the PUC will investigate CMP's practice of requiring deposits from customers who receive their electricity supply from a competitive energy provider (CEP), and CMP's accounting and application of such deposits, including how deposits are allocated in partial payment/disconnection situations.

As previously reported, CMP has experienced a significant increase in Standard Offer bad debt, not seen in the same magnitude at either the other utilities, or in bad debt levels for distribution service.  For example, as of April 2010, there was a $6.2 million deficit in the retainage account for the residential and small commercial Standard Offer class, versus $863,000 in April 2008.  

The PUC's Notice of Investigation issued in Docket No. 2010-327 on October 19 contains a primer on several cases where Standard Offer bad debt has been considered.  

As noted by Matters, the Commission previously determined that CMP was inappropriately allocating partial payments to arrearages due to a vintaging system which treated arrearages past 90 days due as the same age regardless of their actual age.  This had the effect of placing newer distribution arrearages in line for payment ahead of older Standard Offer arrearages.  While the oldest charges are to be paid first, distribution charges take precedence when they are the same age as the Standard Offer charges.

Separately, as part of an investigation into CMP complaints, PUC Staff noted that CMP's accounts receivable increased by 104% from $16.6 million in 2004 to $34 million in 2008, which seemed to be tied to CMP's decision to outsource its credit and collections function at the end of 2003.

The PUC investigation will consider:

1. Whether the current Standard Offer retainage account and accounts receivable balances have been negatively impacted by CMP's management and/or accounting practices.

2. Whether CMP has acted prudently in its collection of its accounts receivables, including Standard Offer receivables.

3. Whether, and to what extent, CMP should be allowed to recover the current Standard Offer retainage account balance in excess of the uncollectible adder.

4. Does the Standard Offer uncollectible adder and retainage mechanism provide the correct incentives for prudent credit and collection activities?

5. Has CMP properly applied the interim payment allocation methodology?

6. Has CMP correctly addressed the payment vintage allocation problem going forward?

7. Is CMP authorized to collect security deposits from customers who receive supply service from a CEP and, if so, where are the related rights and obligations defined?  If authorized, does the authorization apply if CMP is not the billing agent for the CEP?

8. Has CMP properly accounted for CEP deposits and partial payments in its collection activities involving customers who receive service from a CEP and is CMP properly treating remaining deposit balances upon account finalization?

Commission Staff has discovered, based on a customer inquiry, that CMP's standard practice is to require a deposit from its commercial and industrial customers based on the customer's total bill rather than just the T&D portion of the bill, even if the customer receives its energy from a Competitive Electricity Provider (CEP) and not from the Standard Offer.  "It is not clear based on the summary investigation conducted whether CMP's practice is permitted under Chapter 815 of the Commission's Rules or whether a CEP's permission is required to authorize such practice since CMP's collection may inhibit a CEP's ability to collect a deposit for CEP service from customers who have already paid a deposit to CMP for such service," the PUC said in its Notice of Investigation.

   
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