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Massachusetts DPU Approves Model Terms for Purchase of Receivables
June 17, 2011
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The Massachusetts DPU has approved model terms and conditions to implement electric Purchase of Receivables (10-53).
The model terms and conditions must now be implemented in compliance tariffs by each individual electric distribution company. Initial filings must be made within 30 days, with a 60-day follow-up filing showing additional cost data.
Each electric distribution company's POR program shall take effect upon the following date after DPU approval of the each company's individual POR implementation plan: (1) within three months after approval for a distribution company with an affiliate administering a POR program in another state (National Grid, WMECo); and (2) within six months after approval for any other distribution company (Nstar, Unitil).
In other words, POR implementation will take a minimum of five months at National Grid and WMECo, and eight months at Nstar and Unitil (60 days for filing a compliance tariff plus the post-approval deadlines). Implementation may take longer depending upon the length of time required for the DPU to review and approve the implementation plans.
Utilities shall bear the burden of demonstrating the reasonableness of any proposed modifications to the model terms and conditions when submitting their compliance filings.
The utility-specific compliance plans will contain the discount rates. The model terms establish that the discount rates shall contain an Uncollectible Percentage, an Administrative Cost Percentage, and a Past Period Reconciliation Percentage.
Discount rates will vary by customer group, though the specific grouping of classes is left to the utilities.
As requested by suppliers, the Past Period Reconciliation Percentage (PPRP) will be calculated based on the actual uncollectible experience of all distribution customers in the customer rate class, rather than that of only those customers purchasing service from the competitive suppliers.
"All else being equal, a PPRP that is based on a broader group of customers will decrease the volatility of the bad debt rate in the POR program, thereby providing competitive suppliers with accurate and reliable data about the credit risks associated with these markets," the DPU said.
Under the model terms, the utility shall pay a competitive supplier for amounts already existing as outstanding accounts receivables of the competitive supplier at the commencement of the utility's POR program.
POR is required for customers on utility consolidated billing; however, suppliers may continue to dual bill some customers while using utility consolidated billing for others.
Although not memorialized in the model terms, the DPU said in its order that it will monitor the bad debt levels of competitive suppliers participating in the POR program to police potential cherry picking which could occur since there is no all-in requirement. "For example, if we find that the bad debt rate of a particular supplier significantly exceeds that of the POR customers in the rate class as a whole, then the Department may investigate and take appropriate action, which could include restricting the supplier from participating in the POR program."
Purchased receivables will include those from the sale of electricity, capacity and ancillary services such as the provision of reserves and all other services relating to generation required by ISO-NE, and retail offerings that utilize renewable energy certificates or represent alternative compliance payments that are bundled with generation, provided that such products can be billed using the standard complete billing service platform (utility consolidated billing).
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