Blended POR Uncollectibles Rate at ComEd Needed to Mitigate Flat Administrative Cost Charge, Dominion Retail Says

May 24, 2011
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A blended Purchase of Receivables discount rate is appropriate at Commonwealth Edison because it alleviates some of the inequities caused by the flat 50¢ administrative charge per bill issued under utility consolidated billing with POR, Dominion Retail said in rehearing testimony before the ICC (10-0138).

As only noted in Matters, the ICC is considering whether to maintain the current blended POR uncollectibles rate of 1.8453%, or to return to separate residential and commercial uncollectible rates, as originally adopted (2.239% residential and 0.774% non-residential, though these figures would be updated based on new data).

Although the issue of the flat 50¢ charge for administrative cost recovery was not set for rehearing at the ICC (the issue has proceeded to the courts), Dominion Retail said that the presence of the charge supports continuation of the blended uncollectibles discount rate.

Specifically, Dominion Retail said that the 50¢ charge results in a very high effective discount rate for low volume customers, such as 0.798% for administrative costs alone for a residential customer with annual usage of about 4,800 kWh. For a residential customer using about 12,000 kWh per year, the administrative discount rate would be 0.3839%

In comparison, applying the 50¢ per bill charge to the average medium load delivery customer (which has an average load of 179.3 kW and annual consumption of 519,817 kWh) would result in an administrative discount of a mere 0.021%.

"Thus, a low use non space heat residential customer would be paying a rate that is 40 times higher than the average medium load delivery customer," Dominion Retail said.

The Commission would further "aggravate" this current difference in effective discount rates among customers if it abandoned the blended uncollectibles rate, Dominion Retail said.

However, the Retail Energy Supply Association said that a combined uncollectibles rate, "violates principles of cost causation and results in subsidization," of residential customers and their suppliers.

Furthermore, the Illinois Competitive Energy Association said that, in adopting a combined uncollectibles rate divorced from actual uncollectible costs, "the Commission appears intent on picking winners and losers with regard to ComEd's Rider PORCB tariff."

Dominion Retail, however, argued that the ICC already did just that in adopting the 50¢ per bill charge as opposed a volumetric charge for administrative costs. Dominion Retail reiterated that the start-up costs recovered under the 50¢ fee are not driven by the number of bills issued, and thus the flat cost recovery reflected a policy choice and not cost causation. The ICC should affirm its similar policy choice with respect to uncollectibles, Dominion Retail said.

ICEA further warned that the use of a blended uncollectibles rate, which results in a higher uncollectibles cost for commercial customers on POR versus what is charged to default service customers, tilts the playing field against competitive supply.

"It seems clear ... that inflating the uncollectible risk associated with a small commercial customer discourages the use of PORCB for that class of customers. The General Assembly did not authorize the PORCB program to benefit the residential customer class at the expense of the small commercial customer class," ICEA said.

Parties disputed whether the combined uncollectibles rate is discouraging the use of POR for non-residential customers. Dominion Retail cited a discovery response by ComEd to RESA as showing that 365 non-residential customers were using POR under the separate uncollectible rates, while 2,058 non-residential customers were on POR using the combined rate.

RESA, however, said that it still has some discovery requests outstanding, and added that the numbers it has seen appear to support its contention that the combined uncollectibles rate is discouraging POR use by non-residential customers. RESA said it will address the data further in rebuttal testimony.

ComEd supports separate uncollectible factors for residential and non-residential customers.

Staff said that its position has not changed from its direct testimony, in which Staff said that ComEd's class-specific factors "is neither right nor wrong" but warned that whatever uncollectibles and administrative cost mechanisms are chosen should ensure that the total discount rate is not prohibitively high for small usage customers (as Staff was opposing the 50¢ charge per bill).

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