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Maryland PSC Accepts WGL POR Compliance Tariff With Modifications
June 29, 2011
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The Maryland PSC accepted, with modifications, Washington Gas Light's compliance tariff to implement Purchase of Receivables with bills rendered on and after June 29, 2011, which is the start of the July billing cycle.
The major modification was striking language WGL had included in the compliance filing which added bad debt as a component to be reconciled in the reconciliation component.
Originally, WGL did not include a reconciliation of bad debt since its POR proposal contained a risk factor addressing any bad debt risk. However, the PSC rejected the risk factor, which prompted WGL, on reconsideration, to seek to include a reconciliation of bad debt.
That motion for reconsideration is still pending, and the merits were not decided by the PSC today. However, as the motion is outstanding and the standing order is to not include a reconciliation of bad debt in the reconciliation component, the PSC did order the removal of the bad debt reconciliation component from the tariff.
During discussion of the issue, PSC Chairman Douglas Nazarian characterized the reconciliation of bad debt as double recovery, implying that, when the base bad debt discount percentage is reset annually, such adjustment will already account for any experienced changes in the acutal bad debt rate. It is not entirely clear, however, if this is the case, or whether the updated annual rate is limited only to bad debt as measured over a set period (and not any prior over/undercollection).
The POR program is voluntary insofar as WGL has the ability to alternatively elect the proration of partial payments instead of POR. Originally, suppliers agreed to a risk factor as part of a POR program in exchange for WGL agreeing to offer POR instead of proration. With the risk factor eliminated by the PSC, suppliers have not opposed reconciliation of bad debt. Adjudication of the bad debt issue in a manner which does not expose WGL to additional costs from POR is likely required to sustain the offering of the POR program.
As more fully discussed in our 6/17 story, the discount rate for POR will be 4.39% for residential accounts, and 0.83% for non-residential accounts.
The PSC also approved a modification to WGL's compliance tariff to ensure that reconciliations are symmetric; e.g. WGL imposes a charge for under-recoveries and credits suppliers for over-recoveries. The tariff that the PSC originally directed WGL to file inadvertently removed the provision for the reconciliation of over-recoveries.
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