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Proposed Order Would End Bypassable SOS Admin Charge, Return at BGE
June 2, 2011
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The bypassable SOS Administrative Charge and bypassable return component at Baltimore Gas & Electric would be eliminated under a proposed order at the Maryland PSC (Case 9221).
Currently, the bypassable SOS admin charge including the return component is 4 mills/kWh for residential customers, 5.5 mills/kWh for Type I customers, 6.0 mills/kWh for Type II customers, and up to 3.0 mills/kWh for hourly priced service.
Additionally, the proposed order would find that, "all SOS costs and revenues will be considered as part of the Companies' [sic] standard operations in the next rate case; and that until the next rate case, CWC [cash working capital] costs shall be recovered dollar for dollar for cost recovery and shall earn a rate of return set at the authorized rate of return as set in the Company's last rate case and shall be subject to an annual review proceeding for true-up purposes."
The return BGE receives on SOS service would now be nonbypassable since, "SOS cannot exist without distribution services, and it is a part of a normal utility service."
"[S]ince all customers must use distribution services, there is no overcharge or substation [sic] of non-SOS customers by having the SOS rate of return as set above," the proposed order states.
"No additional return is ordered as using the overall cost of capital is a generous level of return and is a reasonable rate of return based upon the risk level of providing SOS," the proposed order finds. The proposed findings are substantially similar to the conclusion in a pending proposed order which would eliminate the SOS admin charge at Pepco and Delmarva (2/7). Both proposed orders were authored by Hearing Examiner Dennis Sober.
The proposed order finds that, "continuing the Administrative Charge causes the rate paid for SOS to be artificially too high."
"Since the [retail] market is fully mature and functional, there is no need to have any adjustments to try to keep SOS rates too high and no need in a competitive market to try to benefit any segment of the competitive market at the expense of competitors. Since all customers pay the same distribution rates, suppliers who can operate efficiently will still be able to be profitable. It is the utilities who must accept customers that suppliers reject as not worthy or as to [sic] high a business risk to take on as a customer. It is time to see if the end game objectives of the move toward competition will present themselves or whether the market can't sustain itself without artificial supports," the proposed order states.
The proposed order rejects Staff's recommended bypassable "allocated cost component" to recover certain costs of SOS service currently collected in distribution rates, such as customer accounts expenses, billing expenses, credit and collection expenses, customer service expenses, and customer information expenses related to generation service.
"I reject this proposal in that there is no hard evidence to support the setting of an actual adjustment. There is speculation that these cost exist but rates can not be set on speculation any more than added costs to SOS customers are justified by speculation as to costs hidden or imbedded in distribution rates. If costs are part of distribution rates that should be considered in SOS rates, the place for that is in BGE's next rate case which will include, the now 'above the line' issue of SOS return," the hearing examiner said.
The proposed order will become a final order of the Commission on July 1, 2011 unless appealed. The similar proposed order at Pepco and Delmarva was appealed by several parties.
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