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PSC To Seek Comments On Future Of POR Program As Commission Concedes "No Simple Way" To Mitigate High Residential POR Discount Without Risk To SOS Customers
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The District of Columbia PSC has again instructed Pepco to re-calculate an update to the residential POR discount rate (originally envisioned to take effect in July 2024), as the PSC concluded, "there is
no simple way to mitigate a high POR Discount Rate without impacting non-POR ratepayers."
In light of this conclusion, the PSC stated that it will issue a forthcoming order, regarding both the electric and natural gas POR programs, seeking stakeholder comments, "to address the future of the
POR program in the District."
In stating its intent to seek stakeholder comments in a future order, the PSC noted that while Pepco-DC has seen a continued increase in the residential under-collection balance under POR (with prior residential reconciliation factors potentially rising to an 8% discount factor component), the large commercial class has, over time, seen a cumulative over-collection balance under POR.
Regarding residential POR under-collections, the PSC stressed that, "the POR Program must be
self-contained, meaning any under-collection tied to POR customers must not be recovered from
non-POR ratepayers."
"[N]o part of the POR program costs should be
recovered from ratepayers," the PSC reiterated
The PSC rejected various alternative residential POR proposals and discounts that it had previously directed Pepco to file, because such alternatives still deferred a significant portion of the residential POR under-collection. The PSC is concerned that such deferrals could ultimately never be recovered under POR usage, and thus be left for ratepayers to pay
See background on the specific prior discount rate proposals here
• May 1, 2024 - SHOCK: Utility Files 15% POR Discount Rate
• August 16, 2024 - After Rejecting 5.4% POR Discount Due To Impact On Retail Market, PSC's Directive Results In 11% POR Discount
• September 6, 2024 - Even Under Latest Directed Revisions, Utility's POR Discount Rate Update Still Exceeds 5.4% Level Previously Rejected By PSC On Competitive Grounds
The PSC found that Pepco's latest filing that had been directed by the PSC (with a 7.7% residential discount rate), from September 2024, "would impose an additional financial burden on
Standard Offer Service ratepayers that would not be just and reasonable."
The PSC said that the deferral under the September 2024 proposal that the PSC had previously directed, "risks shifting future
costs to non-POR ratepayers."
"[T]he Commission is concerned that a POR Discount Rate calculation that creates a net imbalance
would result in a POR Discount Rate that is not guaranteed to reduce the balance of net write-offs
and capture Pepco’s entire cost of administering the POR Program," the PSC said
The PSC said that the residential POR class at Pepco-DC has a $2.6 million under-collection balance
While the PSC was previously concerned with the negative impact to the retail market from proposed POR discount rates of 5.4%, 11%, and nearly 15%, the PSC now concludes that, "it is apparent from reviewing Pepco’s proposals that there is
no simple way to mitigate a high POR Discount Rate without impacting non-POR ratepayers."
Given that the PSC, "still believes that the POR Program must be a self-contained program with all of its
cost components contained therein," the PSC ordered an alternative discount rate calculation that the PSC states would not risk having POR costs eventually recovered from non-shopping customers
The PSC now finds that an earlier proposal from Pepco, that the PSC had previously rejected due to concerns about the negative impact on the retail market, appropriately aligns with the goals of the POR program while not negatively impacting non-shopping customers
Specifically, the PSC said that this earlier proposal -- Pepco's August 16, 2024 proposal -- relies on a methodology that ensures that all POR program costs (including uncollectible expense, working
capital, etc.) stay within the group of customers actually participating in POR
The residential discount resulting from this August 16, 2024 proposal had been 11.3079%.
That's lower than the residential discount that would result from the normal POR calculation (14.8693%), but is nearly triple the current residential discount of 3.9807%
The PSC has given further direction to Pepco concerning the calculation under the August 16, 2024 methodology, and thus the actual residential POR discount may differ from the prior 11.3% filing, but, given the PSC's directed treatment of the under-collection balance from today's order as noted above, it is expected that the new residential discount will be similarly high
Specifically, the PSC directed Pepco, "to calculate the 2024 Residential
POR Discount Rate in a manner consistent with Washington Gas Light Company’s ('WGL')
calculation to achieve a reasonable POR Discount Rate. Pepco is to use 2023 Actual Residential
net write-offs to calculate the Reconciliation Factor instead of using the 2022 Actual Residential
net write-offs as a proxy for 2023 in the Reconciliation Factor calculation. Pepco is also directed
to file its Residential POR Discount Rate tariff with a calculation consistent with the calculation
used by WGL and consistent with the calculation in the Company’s August 16, 2024, filing on the
POR Discount Rate."
The PSC further directed that, "Pepco is directed to recalculate its 2024 Residential POR Discount Rate using 2023 actual net write-offs, consistent with paragraph 9 above [ed. note, paragraph 9 is the paragraph quoted immediately above in this story], and to strictly maintain the program’s cost
responsibility within the POR framework."
The WGL method cited by the PSC generally refers to using an alternative year, rather than the most recent year or time period that is required under the standard calculation, as a proxy to calculate various POR components (namely, uncollectibles, both in the uncollectibles component itself and various factors that rely on such). While WGL had used 2022 write-offs as a proxy, the PSC's direction to Pepco, as noted above, requires use of 2023 write-offs as described above
Pepco is to file an updated residential discount rate within 10 days
PEPPOR-2024-01
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New POR Discount Could Be In 10% Range, Or Higher
March 6, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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