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On June 12, 2026 the District of Columbia PSC issue a joint order in Potomac Electric Power Company’s and Washington Gas Light Company’s Purchase of Receivables (“POR”) program.

The Commission will convene technical conferences within sixty (60) and one hundred twenty (120) days of this Order to discuss additional modifications to the POR program and directed the stakeholders to file a joint report with recommendations on those modifications by December 31, 2026.

“The Commission finds that the residential POR discount rates have risen significantly since the COVID-19 pandemic (after the moratorium on rates was lifted) and remain at a very high level due to a significant uncollectible balance carried over from previous years. The Commission did not prompt the moratorium, and it was implemented for the right reasons then; however, the Commission is now faced with a difficult policy decision as a result. On one hand, maintaining the POR program helps ensure that competitive suppliers can continue operating in the market and offer customers alternative supply options. On the other hand, the increasing level of uncollectible accounts associated with the program results in high costs, posing a potentially significant risk that the uncollectible balance may ultimately be recovered from all distribution customers (including the Standard Offer Service and Default Service customers), if not addressed. The Commission must therefore engage in an uncomfortable and unwanted balancing act.

Commission decisions made on POR issues raised in this docket are provided below.

Whether POR programs continue to serve PUC’s objectives of promoting competition, increasing customer choice, and protecting consumers.

“The Commission acknowledges that the POR Program is but one factor that may affect supplier competition. At the inception of the POR program, we stated that the POR Program is intended to promote customer choice, which increases competition and reduces the commodity price of electricity.  Retail energy competition does not affect the price of default or standard offer service due to its non-competitive, monopolistic rate design. However, the POR Program can provide some cash flow stability to third-party suppliers, allowing them to offer market rates that are nearly competitive with those of the incumbent utility’s default or standard offer service. This promotes customer choice because a more competitive retail energy market increases the likelihood that a customer will find energy supply that aligns with their energy use.  In practice, increasing the number of third-party suppliers in the District has increased competition in retail energy markets. The Commission notes that the number of third-party suppliers serving residential electricity customers in the District has increased substantially since 2012, from 13 to 49 in 2024. Similarly, the Commission notes gain in the number of third-party suppliers serving residential natural gas customers in the District, from 6 in 2012 to 21 in 2024. We continue to support the POR Program as a necessary program to advance the goals of the Retail Electric Competition and Consumer Protection Act of 1999.”

Increases in residential bad debt and POR discount rates:

The Commission has concerns regarding significant increases in residential bad debt and POR discount rates and sought input through the Notice of Inquiry. The issue for residential customers is two-fold: a cumulative under-collection balance that WGL and Pepco are carrying, and how to address the high discount rates. . . . . Based on our evaluation of the parties’ positions, we determine that it is necessary to amortize the POR Program’s bad debt expense balance over a period of three (3) years. The Commission arrived at this determination by analyzing the impact of this proposed three-year amortization on the POR discount rate calculation using the weighted average cost of capital for WGL and Pepco, respectively. Through this analysis, and as stated by the stakeholders, the Commission must choose between a shorter amortization period that provides a lower reduction of the POR discount rate versus a longer amortization period that provides a higher reduction to the POR discount rate, but carries a higher recovery risk. The Commission approves an amortization period of three (3) years because it strikes the correct balance between providing noticeable cost relief to the existing POR discount rate calculation and minimizing the recovery risk. We will continue to monitor and evaluate the bad debt expense and amortization period to determine if further adjustments are needed.”

Use of the late payment revenues to offset bad debt expense:

“The Commission has determined that it continues to be necessary to offset POR bad debt expenses with late payment revenues. The POR Program was designed to be self-contained. Late payment revenues are generated when supplier customers pay their bills late and should continue to be used to offset the bad debt expense associated with the POR Program and help reduce the overall discount rate. Pepco’s response to Commission Staff Data Request No. 1 demonstrates that the 2024 residential discount rate would go from 11.3% to 12.8% if the late payment revenues are removed from the discount rate calculation.80 This shows that the POR discount rate would increase by 13% while providing no benefit to third-party suppliers or their customers if the late payment revenues were excluded. Therefore, the Commission concludes that using the late payment revenues to offset bad debt expense is the most productive way to use these types of revenues.”

Use of administrative adder to the POR Program

“The Commission also evaluated the feasibility of an administrative adder to the POR Program. There is merit to Pepco’s request to include an administrative adder in the POR Program to capture incremental costs of collection, due to the principle of cost causation. However, the Commission notes that neither Pepco nor WGL provided detailed information to assess and quantify the calculation of such an adder. Therefore, the Commission directs Staff to convene a technical conference with Pepco, WGL, and interested parties within 60 days of the date of this Order to discuss, among other things: (1) Whether expressing the adder as a per-bill fee is more favorable than expressing as a percentage of receivables; (2) Incremental costs the Adder will cover; (3) Incremental costs the adder will not cover; (4) How a reconciliation mechanism to account for the adder will work. The Commission directs Pepco, WGL, and the technical conference participants to file a joint-technical conference report outlining its recommendations by December 31, 2026. In addition to the discussion topics outlined in this paragraph, the joint technical conference report must include recommendations on the administrative adder, the customer classes subject to the administrative adder, the calculation method, and a timeline for implementing the administrative adder, as applicable.”

Supplier-specific discount rates

“WGES’s proposal to create supplier-specific discount rates warrants further discussion.81 In its response to Commission Data Request No. 1, WGL provided information on third-party suppliers and their arrearage rates. The Commission considers arrearage rates to be a helpful early indicator for default rates. We note that, among third-party suppliers with residential customers, the third-party supplier with the lowest customer arrearage rate was approximately 20 times lower than that of the third-party suppliers with the highest arrearage rate, which underscores the need for a multi-tiered rate structure. Both Pepco and WGL stated that they did not support WGES’s proposal, arguing that it would be complex, expensive, and time-consuming. . . . . .” It is not unreasonable to request that certain third-party suppliers pay a higher discount rate if their customers have a higher default rate than those of the majority of other third-party suppliers. The Commission believes that a higher discount rate for certain third-party suppliers can encourage more equitable practices, thereby reducing the likelihood of default. We agree with Pepco and WGL’s argument that trying to establish, reconcile, and update supplier-specific discount rates would be unduly burdensome on both the utilities and Commission due to the complexity, and is not practical. Therefore, the Commission finds that a hybrid approach that adopts a limited multitiered discount rate structure is appropriate. By implementing a multi-tiered discount rate structure, the Commission incents third-party suppliers to manage risks more proactively by maintaining a responsibly screened portfolio that will allow access to the appropriate discount tier. In addition, this approach would be less burdensome than a supplier-specific discount rate, while adhering to the principles of cost causation. The Commission directs Staff to convene a technical conference with Pepco, WGL, and interested persons within 120 days of the date of this Order to discuss the feasibility and logistics of developing a multi-tiered approach that establishes three discount rates: a top-tier, a middle-tier, and a bottom-tier. The technical conference discussions shall include, but are not limited to: (1) What are the challenges to implementing a multi-tiered discount rate? (2) What changes are necessary to Pepco and WGL’s billing system in order to implement a multi-tiered discount rate? (3) What are the cost implications for implementing a multi-tiered discount rate? (4) What is the optimal number of tiers under a multi-tier framework? (5) What is the timeline for implementation of the multi-tiered discount rate? (6) What is the nature and frequency of reports that Pepco and WGL should provide? The Commission directs Pepco, WGL, and technical conference participants to file a joint-technical conference report outlining its recommendations by December 31, 2026.”

Commercial POR Program:

“With regard to the commercial POR Program, the discount rate for the commercial classes has remained at or close to zero. In some past instances, the commercial POR discount rate was negative. The Commission’s conclusion is similar to that articulated by DOEE’s Retail Electricity Competition in DC: Market Trends and Analysis. Commercial class customers tend to understand the retail market more than residential customers and can leverage large energy use through short-term contracts at prices lower than standard offer or default service rates. 85 The commercial POR Program customers are making payments, resulting in extremely low default rates. The Commission has determined that modifications to the commercial POR Program are not required at this time.”

OPC request to investigate WGES

“In its comments on the Notice of Inquiry, OPC recommended that the Commission “initiate an investigation into [the] pricing disparity” between WGL and WGES, stating that WGES has consistently offered lower prices than its parent company, WGL, that WGES is the only active third-supplier in the District’s retail natural gas energy market, and suggests that WGES “benefits from insider knowledge or preferential access to customer data and resource acquisition strategies.” 86 OPC did not support its claims with evidence of any kind. In response to OPC’s claims, WGL states that it complies with 15 DCMR § 3901.5 and does not provide preferential treatment to affiliates or customers of affiliates in providing regulated services.”

“The Commission has the authority to order an investigation on its own motion or on the petition of any person, at any time, pursuant to 15 DCMR § 101.2. The Commission recognizes that OPC has not responded to WGES or WGL’s response to OPC’s initial claim. Before the Commission decides on whether or not to order an investigation, we provide OPC with an additional twenty (20) days from the date of this Order to respond to WGES and WGL. Based upon that filing and the record, the Commission will determine if an investigation is needed.”

As background in Order No. 22442, the Commission found that the POR Program should be evaluated to determine how it could be further improved and how to address the residential class cumulative under-collections. The Commission issued a Notice of Inquiry on June 18, 2025, requesting comments from stakeholders on a variety of issues affecting the POR Program. The Commission issued a Public Notice on January 23, 2026, inviting comments on Pepco and WGL’s responses to data requests from the Commission

The Commission received input from Pepco, WGL, the Office of People’s Counsel of the District of Columbia (“OPC”), District Department of Energy and Environment (“DOEE”), Washington Gas Light Energy Services (“WGES”), and the Retail Energy Supply Association (“RESA”).