NOTICES

PENNSYLVANIA PUBLIC UTILITY COMMISSION

Default Service Reconciliation Interim Guidelines

[42 Pa.B. 5606]
[Saturday, August 25, 2012]

Public Meeting held
July 19, 2012

Commissioners Present: Robert F. Powelson, Chairperson; John F. Coleman, Jr., Vice Chairperson; Wayne E. Gardner; James H. Cawley; Pamela A. Witmer

Default Service Reconciliation Interim Guidelines;
M-2012-2314313

Order

By the Commission:

 As of January 1, 2011, all electric distribution companies (EDCs) in Pennsylvania had moved beyond the rate cap period to a market based default service plan. Traditional methods of reconciliation accounting and of allocating costs to rate classes, as well as significant customer participation in the retail market, have caused a great deal of volatility in default service pricing associated with the recovery of revenue/cost imbalances. By this order, the Commission seeks comments from market participants on changes that this Commission could make in order to better ensure that costs and associated revenues are: (1) appropriately matched; and (2) assigned to the appropriate class; and (3) that default service costs are recovered expeditiously and accurately, as required by the Public Utility Code.

Background

 In order to fully recover the cost of providing default service, all EDCs to date have implemented reconciliation riders to recover the cost of generation, transmission and other related default supply services. Ideally, EDCs would have reasonably forecasted and matched these costs to revenues, resulting in only minor cash imbalances. Unfortunately, however, this has not been the case.

 Traditional methods of reconciliation accounting and of allocating costs to rate classes, as well as significant customer participation in the retail market, have caused a great deal of volatility in default service pricing associated with the recovery of revenue/cost imbalances. In some instances, these imbalances have resulted in significant rate adjustments referred to as ''E-factors,''¹ have produced rate volatility and inaccurate price signals, and have complicated shopping decisions for consumers. These challenges have been well documented in recent Commission proceedings.² These proceedings have raised issues that are likely to have industry-wide implications.

Discussion

 The Commission's objectives are to ensure that the industry's current prices reflect current costs as accurately as is feasible, that EDCs are able to fully recover their just and reasonable default service costs, and that default service customers pay the full cost of default service.

 To further these objectives, the Commission seeks feedback from market participants on changes that this Commission could make to reconciliation riders in order to better ensure that costs and associated revenues are: (1) appropriately matched; and (2) assigned to the appropriate class; and (3) that default service costs are recovered expeditiously and accurately, as specifically required by Act 129 and by the Public Utility Code in general. Resolution of these issues will also help ensure that credits, back billings, and interest payments and charges related to default service are minimized.

 Accordingly, the Commission seeks comments on the following questions:

 1. Should recognition of revenues for monthly reconciliation purposes include ''unbilled revenues''³ for service provided during the month? If not, are there other methods of accounting for revenues that more appropriately match revenues and costs on a monthly basis?

 2. Should costs and revenues be reconciled on a quarterly, or longer basis, or on some combination of quarterly and some other period? How often should adjustments to E-factors be made?⁴

 3. Should transmission and generation reconciliation amounts be netted? If so, how?

 4. Should default service basic and optional (e.g., Time of Use/Real Time Pricing) services be reconciled together or separately for each rate class?

 5. How should/could working capital costs be recovered for default service?

 6. Should the Commission alter how interest is charged/credited on under/over collections? Is the current statutory rate of interest reflective of market rates of interest? How can these interest provisions be improved?

 7. When, if ever, would it be appropriate to use a Competitive Transition Rider (CTR) for the purposes of addressing default service collection issues?

 8. Should E-factors be included in the Price to Compare, as is the current practice?

 9. Can the process for assigning PJM capacity costs or other demand or customer-based costs between rate classes be improved? If so, please describe how best to assign costs for various services to the appropriate rate classes, and provide examples.

 The Commission seeks comments and reply comments on these important questions, as well as any additional issues that market participants feel the Commission needs to address regarding default service reconciliation riders.

 After receiving these comments, the Commission intends to establish interim guidelines and/or to make modifications to the existing default service policy statement and regulations, if necessary.

 The Commission also takes note of an ongoing proceeding regarding transmission service charge (TSC) reconciliation in Investigation re TSC Reconciliation Methods, Docket No. M-2011-2239714. We anticipate taking action in that parallel proceeding at an upcoming public meeting. Where appropriate, we will also incorporate the relevant findings/recommendations from that proceeding for the purposes of establishing guidelines or proposing regulations to improve our default service reconciliation process for both generation and transmission related costs.

Conclusion

 We have opened this docket to solicit comments from stakeholders, including the CHARGE working group,⁵ on changes that the Commission could make to reconciliation riders in order to better ensure that costs and associated revenues are: (1) appropriately matched; and (2) assigned to appropriate customer classes; and (3) that default service costs are recovered expeditiously and accurately; Therefore,

It Is Ordered That:

 1. This docket is opened in order to solicit comments from stakeholders on changes that the Commission could make to reconciliation riders in order to better ensure that costs and associated revenues are: (1) appropriately matched; and (2) assigned to appropriate customer classes; and (3) that default service costs are recovered expeditiously and accurately. Said comments should also include a response to the question of whether a stakeholder meeting should be convened.

 2. This order be served on all jurisdictional electric distribution companies (EDCs), the Energy Association of Pennsylvania, the Office of Consumer Advocate, the Office of Small Business Advocate, and the Bureau of Investigation and Enforcement.

 3. A copy of this order be emailed to all entities on the CHARGE email distribution list.

 4. Notice of this order be posted on the Commission's website and published in the Pennsylvania Bulletin.

 5. Comments be filed within 20 days of the date of publication in the Pennsylvania Bulletin.

 6. Reply comments be filed 15 days after comments are due.

 7. The Law Bureau prepare a recommendation to the Commission within 45 days of receipt of the reply comments.

ROSEMARY CHIAVETTA, 
Secretary

[Pa.B. Doc. No. 12-1665. Filed for public inspection August 24, 2012, 9:00 a.m.]

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¹  An E-factor is a surcharge to an existing reconcilable rate to recover differences between the revenues collected for a specified cost category and the actual costs incurred. 66 Pa. C.S. § 1307.

²  See, e.g., Petition of PPL for Approval to Implement a Reconciliation Rider for Default Supply Service, P-2011-2256365 (July 19, 2012); PPL Proposed GSC-1 For June 1, 2011, Through August 31, 2011, M-2011-2243137 (July 19, 2012), and Lloyd v. PPL, C-2011-2245906.

³  ''Unbilled Revenues'' is a term used in the industry to designate revenues earned from providing utility service during a calendar month, but for which the full cost of service provided has not been billed during the calendar month due to billing cycles that do not coincide with a calendar month. The ''unbilled revenues'' of one month will become the ''billed revenues'' of the next month as part of the next billing cycle. ''Unbilled revenues'' does not mean that the revenues were not billed prior to submission of a reconciliation filing.

⁴  The Commission believes that discussion of this issue will complement reconciliation filings in EDC default service proceedings filed in compliance with the final Commission Order in Investigation of PA's Retail Electricity Market: Recommendations Regarding Upcoming Default Service Plans, Docket No. I-2011-2237952 (Dec. 16, 2011) (statewide investigation of PA's retail electricity market). See also http://www.puc.state.pa.us/electric/electric_CompetitiveMarketOversight.aspx.

⁵  The Committee Handling Activities for Retail Growth in Electricity Working Group is comprised of Office of Competitive Market Oversight (OCMO) representatives, electric generation suppliers (EGSs), default service providers (DSPs), and consumers. It was formed to informally resolve issues that arise in the retail electric market. See http://www.puc.state.pa.us/electric/electric_CompetitiveMarketOversight.aspx.

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