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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.