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Utility Proposes Solution To Mitigate 15% POR Discount Rate, Cautions That Rate May Continue To Be Challenging In Future
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Pepco in the District of Columbia has offered an alternative to the nearly 15% purchase of receivables (POR) discount rate that would result from the standard calculation included in its tariff, but cautioned that, based on current write-off data, high residential discount rates are expected to continue and will be more challenging to address in the future
In its latest proposal, Pepco is not specifically seeking approval of either its original POR update or the new alternative, but offers the alternative for consideration by the PSC
As exclusively first reported by EnergyChoiceMatters.com, Pepco-DC had filed to update the residential POR discount to 14.8693%, up from the current, already high, discount of 3.9807%.
Pepco had said in its original POR discount update filing that, "The increase in the Residential rate is driven by a 90% increase in write-offs compared to 2022 primarily driven by increased collection activity following the lifting of the COVID moratorium."
In response to comments from several retail suppliers who had said that a nearly 15% discount rate would render current retail supplier contracts "uneconomic" and would "crush" the competitive market (story here), Pepco has now proposed an alternative calculation that could be used to set the residential POR discount in D.C.
Pepco's alternative proposal would result in a residential POR discount of 5.4197%, versus the 14.8693% that results from the calculation currently set forth in its tariff
Pepco's alternative proposal, which results in the 5.4197% residential POR discount, is similar to the methodology used by its affiliate Delmarva Power in Maryland. Under the alternative, the residential uncollectibles discount component would be derived by dividing the total
electric supplier uncollectible expense over the life of the POR program by the total electric
revenues billed over the life of the POR program. Furthermore, the uncollectible amounts would be
amortized over a two-year period (2024 and 2025 filings)
However, Pepco cautioned that this alternative may only serve as a band-aid and that the issue of high residential discount rates may be more difficult to address in the future
"Pepco notes that based on the
available 2024 write-off data, the amounts are trending consistently with 2023 and if this continues
through the end of 2024, this change might be more challenging to address next year and in future
filings," Pepco said
Pepco said that using the alternative calculation may also require from the PSC a waiver of
the language in its current tariff
Pepco said, "Pepco is sensitive to the effects of this rate on the competitive market and can propose an
alternative similar to the one used by DPL. Pepco did not propose such an alternative in its April
30, 2024 update filing because, and in contrast to DPL, Pepco did not have the type of historic
undercollection issues that had been experienced by DPL in Maryland and Delaware. That said,
in an effort to find a middle ground and aid judicial economy, Pepco proposes for Commission
consideration a method similar to that used by DPL [as described above]."
PEPPOR-2024-01
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July 2, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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