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Massachusetts POR Compliance Filings Include High Uncollectible Rates

July 22, 2011
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Massachusetts electric distribution companies have filed their preliminary purchase of receivables compliance plans (10-53).

As only reported by Matters (6/17), preliminary cost and discount rate data was due within 30 days, with a final filing within 60 days containing precise administrative cost components in addition to uncollectibles factors (e.g. mid August). The compliance plans will then be adjudicated by the DPU; and, upon a final order, POR shall be implemented within 3 months of such order at National Grid and Western Massachusetts Electric Co., and 6 months at Nstar and Unitil.

Nstar

Nstar would establish class-specific uncollectible discount rates as follows:

Residential: 2.546 percent

Small C&I: 0.785 percent

Large C&I: 0.038 percent

The Residential Customer Class includes customers taking service under the following rates: Rate R-1, Rate R-2, Rate R-3 and Rate R-4 (Boston Edison Company); Rate R-1, Rate R-2, Rate R-3, Rate R-4, Rate R-5 and Rate R-6 (Cambridge Electric Light Company); and Rate R-1, Rate R-2, Rate R-3, Rate R-4, Rate R-5 and Rate R-6 (Commonwealth Electric Company).

The Small C&I Customer Class includes customers taking service under the following rates: Rate G-1, Rate G-2, Rate T-1, Rate S-1, Rate S-2 and Rate S-3 (Boston Edison Company); Rate G-0, Rate G-1, Rate G-4, Rate G-5, Rate G-6, Rate S-1 and Rate S-2 (Cambridge Electric Light Company); and Rate G-1, Rate G-4, Rate G-5, Rate G-6, Rate G-7, Rate S-1 and Rate S-2 (Commonwealth Electric Company).

The Large C&I Customer Class includes customers taking service under the following rates: Rate G-3, Rate T-2, Rate WR, Rate SB-G3 and Rate SB-T2 (Boston Edison Company); Rate G-2, Rate G-3, Rate SB-G3, Rate SB-1, Rate SS-1 and Rate MS-1 (Cambridge Electric Light Company); and Rate G-2, Rate G-3 and Rate SB-G3 (Commonwealth Electric Company).

Different uncollectible rates would apply to the purchase of receivables existing prior to start of the program.

Nstar estimated POR implementation costs as $1.039 million, amortized over three years. A cursory review of the compliance filing did not indicate that Nstar has translated this amount into a discount rate cost component in the filing.

National Grid

National Grid would establish POR uncollectible percentages as follows:

Residential: 1.95%

Commercial: 1.19%

Industrial: 0.34%

National Grid's customer classes, consistent with its basic service groupings, are as follows:

Residential customers shall mean those customers receiving retail delivery service on the following tariffs of the Company: Regular Residential Rate R-1, Low-Income Residential Rate R-2, Optional Time-of-Use Residential Rate R-4 and Limited Residential Electric Space Heating Rate E.

Commercial customers shall mean those customers receiving retail delivery service on the following tariffs of the Company: General Service - Small Commercial and Industrial Rate G-1, Streetlighting Rates S-1, S-2, S-3, S-5, S-6 and S-20.

Industrial customers shall mean those customers receiving retail delivery service on the following tariffs of the Company: General Service – Demand Rate G-2 and Time-of-Use Rate G-3.

Supplier-specific uncollectible rates would be applied for the purchase of existing receivables at POR start-up

National Grid's current estimate of anticipated administrative costs associated with the POR Program is approximately $265,000. The company is proposing an amortization period of one year. A cursory review of the compliance filing did not indicate that the company has translated this amount into a discount rate cost component in the filing.

Western Massachusetts Electric Co.

Uncollectible discount rates would be as follows:

Residential: 3.18%

Commercial: 0.40%

Industrial: 0.19%

WMECO would expect to purchase existing supplier receivables at the effective date of the POR program at discount rates identical to the percentages listed above.

WMECO indicated that significant administrative costs would not be incurred unless the DPU requires that payments to suppliers follow a class-specific payment schedule reflecting that class's average payment time, rather than the once-a-month payment schedule its affiliate uses for POR in Connecticut.

Fitchburg Gas and Electric (Unitil)

Unitil's grouping of customers for discount rate purposes would mirror the default service customer groupings as follows:

Residential/Small General Service - Includes Rate Schedules RD-1, RD-2, GD-1

Regular General Service - Includes Rate Schedules GD-2, GD-4, GD-5, SD

Large General Service - Includes Rate Schedule GD-3.

Total POR discount rates would be as follows:

Residential/Small General Service: 5.88%

Regular General Service: 3.41%

Large General Service: 3.08%

These rates reflect a 0.57% implementation cost component for all classes, a 2.51% ongoing administrative cost component for all classes, and the following class specific uncollectibles components: 2.80% for Residential/Small General Service, 0.33% for Regular General Service, and 0% for Large General Service.

The uncollectible rate reflects Unitil's actual historical electric supply-related uncollectible expenses for the twelve month period ending May 2011.

The rate for development costs is based on a three-year amortization of Unitil's estimated labor costs directly associated with program implementation. The rate for ongoing operating costs is based on actual historical customer accounting costs for the twelve month period ending May 2011, estimated costs for supplier remittance processing, and estimated wire transfer charges.

Discount rates would change annually beginning December 1, 2012, coincident with a default service rate change. New discount rates would be published in the preceding September.

Based on historical customer payment history, payments to the suppliers will occur via wire transfer as follows:

- Residential/Small General Service: No later than 52 calendar days after the consolidated bills are issued

- Regular General Service: No later than 31 calendar days after the consolidated bills are issued

- Large General Service: No later than 23 calendar days after the consolidated bills are issued

However, Unitil said that it is interested in exploring the once-a-month payment schedule for suppliers proposed by WMECO.

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