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Excerpts from the Order:

{***} “The Public Service Commission of the District of Columbia, in PEPPOR-2024-01, by Order No. 22379, rejected the Potomac Electric Power Company’s (“Pepco” or “Company”) Purchase of Receivables (“POR”) proposed tariff for Residential Class customers. Pepco is directed to file a new tariff that modifies the POR Discount Rate calculation for the Residential Customer Class by using Calendar Year 2023 actual Residential net write-offs as a proxy for calculating the Company’s 2024 Residential POR Discount Rate.  Pepco is directed to file a new tariff with a 2024 Residential POR Discount Rate calculation consistent with paragraph 9 of this Order within 10 days of the date of its issuance.

III. DECISION 

6. In reviewing the three (3) 2024 Residential POR Discount Rate proposals Pepco filed with the Commission, the Commission found issues with each that conflicted with the goals of the POR program. The proposal filed on April 30, 2024, calculated a substantial residential rate increase and may have had anti-competitive results. The proposal filed on July 1, 2024, in Pepco’s Limited Reply Comments, created a calculation that would postpone substantial Residential POR Discount Rate increases to the next year or future years. The September 6, 2024, filing proposed moving a net imbalance out of the Residential POR Discount Rate calculation in an effort to comply with Order No. 22259 and decrease the rate. However, the September 6 POR Discount Rate for residential customers creates a rate that would impose an additional financial burden on Standard Offer Service ratepayers that would not be just and reasonable. As we stated in Order No. 16916, at the beginning of the POR program, no part of the POR program costs should be recovered from ratepayers.  
7. Based on data in Attachment D of Pepco’s September 6, 2024, proposed tariff filing, the Commission has identified an upward trend for the Residential Class uncollectible amounts since 2021.17 This upward trend results from significant increases in Residential Class net write offs in 2022 and 2023. Based on this upward trend of bad debt for the Residential Customer Class, the 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. This may result in a scenario where the net imbalance is recovered from non-POR ratepayers at some point in the future. Pepco has not adequately explained whether it is proper or reasonable for the Company to receive its authorized return on this net imbalance from the POR program. As such, the Commission does not find this net imbalance reasonable. 
8. In Order No. 22259, the Commission stated that we were “concerned that a high POR Discount Rate could make it impossible for suppliers to make competitive offers to residential customers in the future.” 19 However, 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. The Commission still believes that the POR Program must be a self-contained program with all of its cost components contained therein.20 In Pepco’s August 16, 2024, filing, the Company used a calculation method that ensures all POR program costs (including uncollectible expense, working capital, etc.) stay within the group of customers actually participating in the POR. The Commission believes that the calculation of the POR Discount Rate from Pepco’s August 16, 2024, filing sufficiently aligns with the goals of the POR program and will have no impact on non-POR ratepayers. 
9. Therefore, the Commission again directs 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. 21 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.  
10. Since Pepco’s POR program began, it largely carried credit imbalances that helped keep the Residential Discount Rate at zero until 2023. Once that credit was exhausted, the Residential Customer Class experienced a steep decline in cumulative under-collections—now at $2.6 million—while the Large Commercial Class retains a $2.2 million over-collection. Pepco’s latest proposal defers some of these Residential under-collections and thereby risks shifting future costs to non-POR ratepayers. However, the Commission reiterates that the POR Program must be self-contained, meaning any under-collection tied to POR customers must not be recovered from non-POR ratepayers.23 By rejecting this proposal, the Commission seeks to correct that potential cross-subsidization and ensure the POR Discount Rate fully captures Pepco’s actual costs. Accordingly, Pepco is directed to recalculate its 2024 Residential POR Discount Rate using 2023 actual net write-offs, consistent with paragraph 9 above, and to strictly maintain the program’s cost responsibility within the POR framework. 
11. Finally, the Commission sees the need to address the continued increase in Residential Customer Class cumulative under-collection amounts and the increase in Large Commercial Class cumulative over-collection balance. The Commission will issue a separate Order seeking comments from stakeholders for both WGL and Pepco to address the future of the POR program in the District.” {***}

Order  (03/06/2025)
PEPPOR-2024-01
(Pepco Purchase of Receivables)