WGES Says Shorter Amortization of WGL POR Costs Would Jeopardize Supplier Participation

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March 4, 2011  

Using anything short of a five-year amortization period for Washington Gas Light's purchase of receivables program costs would create an, "unnecessarily high risk that suppliers active in residential markets would either not enter the residential market or forego using the utility’s billing services," Washington Gas Energy Services said in comments to the Maryland PSC.

As only noted in Matters, the Commission deferred action on WGL's POR program due to concerns about certain implementation costs (see 1/20). WGL's POR program design has generally been approved, and the Commission must now accept specific compliance tariffs. Left to the compliance tariff stage of the proceeding is whether to use a two, three or five-year amortization of POR implementation costs.

Under a five-year amortization, the residential discount rate would be 3.09%, while it would be 3.67% under three-year amortization and 4.39% under two-year amortization.

WGES cited the following in support of a five-year amortization period:

• A five year amortization of the implementation costs in the discount rates will fairly spread these costs to new suppliers who enter the market when POR becomes effective;

• A five year amortization will not place an unfair burden on suppliers that are already in the market when POR becomes effective; and

• A five year amortization will reduce the significant risk that the higher POR discount rates for the two and three year amortization computations may be too high for suppliers to use the utility’s billing services and thus defeat the purpose of having a POR program in the first place.

WGES noted that a five-year amortization period was used for Delmarva Power's POR program. While shorter periods were used in the electric POR programs at Baltimore Gas & Electric and Allegheny Power, WGES noted that those POR programs only included costs specific to POR in the amortized implementation costs, and not the costs of other retail market enhancements (aside from POR) as are included in the WGL POR implementation costs.

In particular, WGL's POR implementation costs include the cost of uniform electronic transactions for the retail gas market, a significant investment appropriately amortized over a longer period, while EDI had already been implemented for electricity and did not need to be included in the POR costs, WGES said.

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