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natural gas

What’s the Latest on Supplier Consolidated Billing?

transmission towers for electricityWe have blogged previously about a petition filed at the Maryland Public Service Commission by five electric and natural gas retail suppliers seeking implementation of supplier consolidated billing (SCB). We did a video about it when the petition was filed, and our last blog on this topic was in February 2018, just after the legislative-style hearing concluded in Baltimore.

In the blog, you’ll see that we summarized the events at the hearing and even provided a picture of the four supplier witnesses testifying before the Commission, along with Brian Greene of our firm, so that everyone could get a feel for what it’s like to appear before the Commission (from the view of the Commissioners, no less!).

So what happened in the case since then, you ask?

In May 2018, the Commission issued this Notice of Briefing Schedule, requesting comments primarily on the legal issue of whether Maryland statutes allow a supplier utilizing SCB to initiate the disconnect process if the customer does not pay. Parties, including the petitioners, submitted comments on June 14 and June 28. We are now awaiting a Commission order or further guidance.

There’s also an SCB proceeding pending at the Pennsylvania Commission. On June 14, 2018, the Commission held a legislative-style hearing that will continue on July 12, 2018. You can get more info on the Pennsylvania proceeding here.  Delaware is also moving towards an SCB proceeding, with a recent Hearing Examiner’s report in Docket No. 15-1693 recommending approval of a Stipulated Order that calls for a new docket to be opened now to address whether SCB is permitted in and should be adopted in Delaware.

If you have questions about SCB or electric or natural gas retail service in general, please contact one of GreeneHurlocker’s energy and regulatory lawyers.

DC Commission Instructs WGL to Implement a Purchase of Receivables Program

The District of Columbia Public Service Commission (PSC) has issued an Order directing Washington Gas Light Company (WGL) – the only natural gas distribution utility in the District – to implement a purchase of receivables (POR) program for competitive retail natural gas suppliers that sell natural gas supply in the District.  WGL must file an implementation plan by July 17, 2017, and stakeholders may comment on the plan within 15 days thereafter.

In the Order, the PSC adopted components of a POR program that will resemble WGL’s program already in effect in Maryland, and also Pepco’s program already in effect in the District. At the outset, the PSC made clear that POR programs promote customer choice, thereby increasing competition and reducing commodity prices. The PSC noted that the availability of POR programs has led to increased supplier participation in Maryland and in the District’s electric choice programs.

The PSC addressed the elements of the discount rates for suppliers serving residential and non-residential customers. Without going into every component, WGL’s POR will be non-recourse as to suppliers and the POR discount rates will include: (1) bad debt expense; (2) implementation costs; (3) incremental collection costs; (4) cash working capital costs; (5) risk factor; (6) reconciliation factor; and (7) late payment revenues. A few points here worth mentioning:

  • WGL must include in its implementation plan a detailed breakdown of implementation costs. WGL has previously stated that its the costs will range from $600,000 to $800,000, which the PSC noted is far more than the $150,000 it cost Pepco to implement a POR program in the District in 2012, and far less than the $3.3 million it cost WGL to implement a POR program in Maryland in 2012.
  • The risk factor will be set to zero.
  • WGL must include late payment revenues collected on purchased receivables in the discount rate.
  • Non-commodity charges, such as early termination fees, are not to be purchased.

The PSC initiated this case after the Retail Energy Supply Association (RESA) raised POR as an issue in a separate proceeding regarding WGL’s billing system. The PSC held, in that case, that consideration of a POR program was warranted, and initiated Formal Case 1140 to consider it. Stakeholders, including WGL, RESA, and the Office of People’s Counsel, filed comments in FC 1140 during the months leading up the Order.

If you would like more information about GreeneHurlocker’s work in the competitive retail energy space throughout the Mid-Atlantic region, or other related areas, please contact one of our energy lawyers.

Regulators Continue to Press on Consumer Rules

March 2017 Energy Update Brian Greene

The March Energy Update features Brian Greene explaining efforts in Delaware, Maryland and the District of Columbia to improve consumer protection rules that apply to selling commodities direct to consumers in the energy and natural gas markets.

Maryland Commission Adopts New Consumer Protection Rules

On February 10, 2016, the Maryland Public Service Commission approved revised consumer protection regulations governing the retail sale of electricity and natural gas. The revised rules include several substantive changes relating to how retail suppliers operate in Maryland. The changes involve additional up-front pricing disclosures to customers, and additional notices throughout each customers’ contract term. One of the more significant operational changes is a new requirement that utilities process a customer’s request to switch electricity providers within three business days. The revised Rules also include entire new sections addressing retail suppliers’ relationships with their marketing and sales agents.

We have previously blogged here, here, and here at various stages of this two-year rulemaking. In sum, the Commission initiated this rulemaking in response to the extreme cold weather conditions in the beginning of 2014 that caused wholesale energy prices to spike dramatically. Generally speaking, customers who had signed up for monthly variable retail priced contracts, which are tied to wholesale prices, saw their retail rates increase considerably. The primary policy goals of the revised rules is to assist customers in better understanding the energy products they are considering, to require certain notices to customers during their contract term, and to afford customers the opportunity and flexibility to change their energy provider quickly to take advantage of pending offers.

The next step for implementation will be publication of the final rules in the Maryland Register. While the timing of the publication is uncertain, it is anticipated that the rules will become effective at some point in March 2016. Retail suppliers will need to review their contract language, third-party verification scripts, training materials, and other areas to ensure they are complying with the new rules. Retail suppliers that are unable to comply with any of the new requirements will need to seek a waiver from the Commission.

If you have any questions about Maryland’s new retail energy supplier rules or the process for seeking a waiver, please contact one of GreeneHurlocker’s energy lawyers for more information.

Dominion Buying Gas Distributor Questar

Dominion Resources Inc. (“Dominion”) announced Monday, February 1, 2016, that it plans to purchase Utah-based Questar Corporation (“Questar”), a natural gas distributor, for approximately $4.4 billion in an all-cash deal.  Purchasing Questar will expand Dominion’s customer base to customers in Western states.  With Questar’s acquisition, Dominion would serve approximately 2.5 million electric customers and 2.3 million gas customers in seven states.  In addition, Dominion would operate more than 15,000 miles of natural gas transmission, gathering and storage pipelines.

The acquisition is set to close by the end of 2016, pending approval from Questar’s shareholders, the Federal Trade Commission, and, if needed, the Utah Public Service Commission and the Wyoming Public Service Commission.  The companies indicated they will also give information about the transaction to the Idaho Public Utilities Commission. After closing, Questar will remain headquartered in Salt Lake City, Utah, operating as a unit of Dominion.

If you have questions about the Dominion acquisition or utilities regulation in Virginia or the mid-Atlantic, please contact one of our energy lawyers.

Maryland PSC Lowers Retail Natural Gas Suppliers’ WGL Winter Collateral

Decision Relieves Retail Suppliers from Paying Excessive Collateral to WGL 

 

The Maryland Public Service Commission has granted a request by Washington Gas Light and two retail suppliers to lower the collateral for suppliers operating on WGL’s system for the winter season.  Click here for WGL’s initial filing and here for the supplemental filing that proposed an amendment to the WGL tariff.  This is a significant reduction that will help retail suppliers continue to bring competitive natural gas products and services to WGL’s Maryland customers.

A little background:  retail suppliers must post collateral twice per year (winter and summer) to operate on WGL’s system.  The purpose of the collateral is to protect WGL in the event a supplier defaults and does not deliver gas to WGL, and WGL is forced to buy gas on the wholesale market. WGL calculates each supplier’s collateral based on a formula in the tariff.  If a supplier does not post by October 15, it cannot continue to enroll new customers. If a supplier does not post by October 31, it will be booted out of the WGL choice program.

Without getting into a whole lot of boring detail here about the formula used to calculate collateral, I will just say that one of the biggest factors in the formula is the use of Transco Zone 6 Non-New York prices from the past three years.  The problem with employing the formula for this winter season was that last year’s extremely and unusually cold weather caused the Transco Z6 NNY prices to increase dramatically on certain days during the year.  Strict adherence to the tariff formula would have resulted in WGL collecting about $54 million in collateral this year as compared to about $4 million last year.  WGL recognized that $54 million in collateral is excessive.

The “new and improved” formula, which is in effect for this winter season only, reduces the Transco Z6 NNY price by eliminating every day during the past year when the price exceeded $20.00 per Dth.  That eliminated 13 days. Whereas the price last year was around $8.00 per Dth, it would have jumped to $25.21 this year.  Eliminating the 13 days brings the price back down into that $8.00 neighborhood.

How big of a deal is this?  Suppliers who posted $300,000 in collateral for last year’s winter season would have seen their collateral jump to between $2 million and $2.5 million, with no significant increase in customers or throughput. The only suppliers who would not have felt this pain would have been those who attained a certain credit rating from a ratings agency – something that most smaller suppliers have not attained.

Suppliers should be hearing from WGL in the next few days about their reduced collateral requirement.  Since most suppliers have already posted the larger amount, we suspect that they will be afforded a chance to amend their bonds or reduce their letters of credit, etc., to meet the new, lesser amount.

Finally, WGL and Maryland Commission Staff will monitor this year’s Transco Z6 NNY prices to see if last year really was an anomaly.  The Transco Z6 NNY price is actually an average of the past three years, so WGL would need to make a filing next year if last year’s prices continue to skew the formula and result in excessive collateral requirements.  Yes, that is right – the $25.21 is an average of the past three years’ prices, so you can imagine how high the 13 days were thatthrew the entire formula off-kilter.

GreeneHurlocker’s lawyers represented the Retail Energy Supply Association at the Maryland Public Service Commission with respect to this issue.