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Draft Order: Class-Specific POR Discount Rates in Illinois Contrary to Statute

July 13, 2011
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The Public Utilities Act does not allow the Illinois Commerce Commission to adopt separate electric Purchase of Receivables discount rates for residential and commercial customers, a proposed order in ComEd's POR proceeding would conclude (10-0138).

As only noted in Matters (2/25), the issue of the uncollectibles component for the POR discount rate is being addressed on rehearing. Dominion Retail favors a single, blended uncollectibles charge applicable to all customers under POR, which is currently in place. The Retail Energy Supply Association and Illinois Competitive Energy Association favor separate uncollectible discount rates for residential and commercial customers. Not subject to rehearing is the 50 cents charge per utility consolidated bill at ComEd (required for use of POR), which will be included in the discount of receivables regardless of which method of uncollectible recovery is used.

The draft order notes that, in requiring POR, Section 16-118(c) of the Public Utilities Act provides, in four places, that a "rate" shall be established at each utility, not "rates."

Given that a singular and not plural was used, "we cannot presume that the General Assembly intended to allow the existence of more than one 'rate' for POR services," the proposed decision states. The draft also notes that the use of the singular term rate with respect to POR, "is in stark contrast to language in other portions of the Public Utilities Act regarding other utility rate-type charges, which envision 'rates.'"

"Therefore, we conclude that the language in Section 16-118(c) of the Public Utilities Act, in its current form, does not permit this Commission to devise more than one 'rate' for POR services," the draft states.

Additionally, the proposed order would find, irrespective of the statutory prohibition, that policy arguments do not favor the adoption of separates rates for commercial and residential customers, particularly given the already accepted flat 50 cents per bill charge applicable to POR.

Differing factions of suppliers have debated whether a blended discount rate or separate discount rates would be more beneficial in promoting competition, which is the goal of the Commission as set in statute.

"The promotion of competition necessarily favors including the interests of the vast majority of Illinois consumers. Neither RESA, nor ICEA nor ComEd have stated any reason establishing that it is best to ignore what is more than 90% of the potential PORCB customers," by not focusing on promoting residential competition through a blended discount rate, and instead focusing on promoting small commercial competition through the use of class-specific discount rates, the draft finds, given that the vast majority of customers are residential.

"We further note that no party has contested the veracity of Dominion's assertions indicating that ComEd's POR program is already skewed in a manner that disfavors competition in the residential market [due to the flat 50 cents per bill charge]. The interests of competition are best served by continuing to use a blended rate," the proposed order concludes.

"[A]s Staff and Dominion point out, due to the imposition of the $0.50 per month administrative and start-up cost charge upon all POR customers, many residential customers, specifically, those who do not consume much electricity, will be paying a greater proportion of the cost of those services, in relation to what they actually use, than larger users. As Staff notes, even a relatively small-use customer will be yielding a positive net effect, due to the imposition of the monthly $0.50 charge upon all customers, regardless of usage. While some parties have claimed that the retail electric suppliers will be under-recovering [costs of POR] from residential customers if there is a blended uncollectible charge, the $0.50 charge should make up the difference in relation to customers who do not use much electricity, which would be most residential customers," the draft notes.

While the 50 cents per bill charge is not subject to rehearing, the proposed order would agree that the ICC has a responsibility to view the impact of all POR elements as a whole in setting the uncollectible discount rate structure.

The draft order calls the "most compelling" argument for class-specific uncollectible rates the fact that using a blended rate means the POR uncollectible rates will not mirror the uncollectible charges applicable to default service customers (which are class specific).

"However, according to the figures proffered by RESA the difference is less than one percent. In fact, it is approximately one-half of one percent. The parties could have, but did not, present evidence establishing that this figure, which, on its surface, appears to be small, is material to them, or, is a material obstacle to competition in Illinois. Because there is no such evidence, we cannot conclude that the difference between the two rates is material," the draft finds.

"In summation, the parties did not present evidence establishing that a blended rate would harm competition. This is the case because they did not present evidence establishing that the difference between a blended rate and separate charges is material. In so determining, we acknowledge that the parties asserted this factual conclusion. However, the record on rehearing is absent of facts indicating that this difference, which appears to be small, would be one that actually 'makes a difference' in terms of the overall operation of an alternative supplier's business, as there is no evidence as to what this difference would result in or has resulted in other jurisdictions with competition," the proposed order concludes.

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