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Even Under Latest Directed Revisions, Utility's POR Discount Rate Update Still Exceeds 5.4% Level Previously Rejected By PSC On Competitive Grounds
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A further revision to Pepco's update of its residential purchase of receivables discount rate in the District of Columbia still results in a discount rate that exceeds the previously rejected rate of 5.4197%
As first reported by EnergyChoiceMatters.com, the D.C. PSC in early August rejected both of Pepco's POR update proposals for the residential POR discount rate -- both the 14.8693% rate resulting from the standard calculation, and an alternative rate of 5.4197% that Pepco had offered, which, in brief, resulted from amortizing 2023 uncollectibles over two years
The PSC in August specifically expressed concern with the potential negative impact on the retail market from both of these proposed POR discount rates
The PSC ordered an alternative residential POR discount rate calculation, directing the use of 2022 values for bad debt expenses and late fees in the POR calculation
Pepco did so, but only did so for the uncollectibles POR component. The reconciliation component still used 2023 bad debt levels (and, left unchanged, still resulted in an 8% reconciliation factor). The resulting total residential POR discount was 11.3079%.
Following a previously reported interrogatory issued by PSC Staff, Pepco met with PSC Staff concerning the PSC's direction to use 2022 bad debt levels
Pepco reported that PSC Staff clarified that the intent of the PSC's prior order was for Pepco to use 2022 bad debt and late fee revenues as a proxy whenever bad debt and late fee revenues are used in the POR discount rate calculation, not only for the uncollectibles component. More specifically, Staff said that 2022 bad debt and late fee revenues should be used in setting the new reconciliation factor component of the residential POR discount rate, rather than the 2023 bad debt data that had been used in arriving at the 11.3079% discount
Pepco has now filed a residential POR discount rate that uses 2022 bad debt and late fee revenues throughout the calculation of the total discount
The resulting residential POR discount is 7.7466%
That's still higher than the 5.4197% rate that Pepco had filed using a two-year amortization period discussed above, which the PSC had rejected due to concerns about the negative impact on retail choice
In previously rejecting the 5.4% discount, along with the original, nearly 15% discount, the PSC had said, ""[W]e are concerned that Pepco’s POR proposals could have unintended anti-competitive consequences."
"The Commission is concerned that a high POR Discount Rate could make it impossible for suppliers to make competitive offers to residential customers in the future," the PSC previously said in rejecting both the 5.4% and 15% discounts
In using 2022 rather than 2023 bad debt data in the reconciliation factor, Pepco says that it will
defer a net imbalance of nearly $1.9 million for recovery in a future period
Such imbalance will earn interest at Pepco's most recent authorized distribution system rate of return, Pepco said
Pepco's latest filing including the 7.7466% residential POR discount rate remains subject to PSC approval
Pepco's current residential POR discount for D.C. customers is 3.9807%
PEPPOR-2024-01
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September 6, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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