Kimberly A. Curry, Esq.

July 25, 2017

Page 1

#17, 5/31/17 AM; ML# 214942, RR-2984

#20, 7/5/17 AM; ML#s 214942 and 215416, RR-2984 and TG-320

July 25, 2017

Kimberly A. Curry, Esq.

Assistant General Counsel

Baltimore Gas and Electric Company

2 Center Plaza, 12th Floor

110 West Fayette Street

Baltimore, MD 21201

Dear Ms. Curry:

The Maryland Public Service Commission (“Commission”) has reviewed Supplement No. 604 to P.S.C. Md. E-6 filed on May 1, 2017 by Baltimore Gas and Electric Company (“BGE” or “the Company”). The Company proposes to update the discount rates for the purchase of supplierreceivables (“POR”). After considering this matter at the May 31, 2017 Administrative Meeting, the Commission suspended the tariff revisions 60 days from the effective date of June 1, 2017 and deferred the matter for consideration to a future Administrative Meeting. The Commission further considered this item at its July 5, 2017 Administrative Meeting and took the matter under advisement.

Code of Maryland Regulations (“COMAR”) 20.53.05.06 allows retail energy suppliers to use electric utilities’ billing systems in exchange for discounting the supplier’s portion of the customer’s payment to defray the utilities’ expenses. Utilities that engage in the consolidated billing process make annual filings with the Commission to update their POR discount rates to reflect program costs and ensure timely recovery. The Commission has given broad guidance to utilities regarding the calculation of the discount rates, which typically factors in uncollected costs, programming costs, late payment charges (“LPCs”), and a reconciliation factor.

BGE’s May 1, 2017 filing sought the Commission’s approval of its tariff revision pertaining to a revised POR discount rate, and also proposed that “LPCs” be removed from the discount rate calculation. BGE’s argument for removal centers largely on its belief that the suppliers should not benefit from LPCs, an argument that has been made to the Commission several times in conjunction with the Company’s annual POR discount rate filing. The Commission has consistently denied this proposal. In this instance, however, despite requesting that LPCs be omitted from its POR discount rate calculation, the 0.2350% residential discount rate submitted by BGE for approval does include LPCs, as do the 0.000% discount rates submitted for the Type I, Type II, and Hourly service classes.

A May 30, 2017 filing by the Retail Energy Supply Association (“RESA”) supported the continued denial of the removal of LPCs from the POR discount rate calculation, and also requested that BGE not be allowed to recover through the POR discount rate the costs associated with RM54, a rule making matter initiated by the Commission to update consumer protection regulations for the competitive supplier market. RESA noted that BGE’s filing attempts to recover $1,361,206 in RM54 program costs, amortized over two years, but did not identify specific RM54 costs or provide support to show that they were prudently incurred or allocated. RESA further contended that, to the extent such costs are identified and appropriately incurred and allocated, allowing BGE to recover 100% of the requested RM54 costs from suppliers would be unreasonable and therefore the Company’s request should be denied.

At the May 31, 2017 Administrative Meeting, the Commission acknowledged the absence of specific data pertaining to the RM54 costs that BGE is attempting to recover through the POR discount rate and deferred the matter for consideration at a future Administrative Meeting. The Commission’s Technical Staff (“Staff”) consequently issued Data Requests regarding the RM54 program costs to the Company on behalf of the Commission.

BGE’s proposed tariff revisions were revisited at the July 5, 2017 Administrative Meeting. At that time, Staff acknowledged receipt of information from BGE in response to the Data Requests, and stated that it was satisfied that the RM54 costs included in BGE’s POR discount rate filing are reasonable and properly amortized, and that the allocation method follows cost causation principles. Staff recommended that the Commission accept BGE’s revised tariff, containing the 0.2350% residential POR discount rate and the 0.000% Type I, Type II, and Hourly POR discount rates.

Since the inception of the POR discount, the Commission has directed BGE and other utilities to track late fees that are assessed and collected as part of the consolidated billing system, and to disclose and include the data as part of the utility’s next annual POR discount rate filing for the Commission’s consideration. For the past six years the Commission has consistently approved the inclusion of the LPCs in the discount rate calculation. Similarly, the Commission has consistently denied any request for exclusion of these charges. The Commission reaffirms the reasons previously given for requiring the inclusion of LPCs in the calculation, declines to make the significant policy change being requested by BGE, and denies the Company’s request that LPCs be omitted from its POR discount rate.

As to the inclusion of RM54 program costs in the POR discount rate, the Commission recognizes that BGE’s Supplier Coordination Tariff, Schedule 3, states that the types of costs recoverable as Program Development Costs include, but are not limited to, “programming, testing, and other information technology costs directly associated with COMAR 20.53.” The Commission also notes, however, that this provision was approved prior to the commencement of RM54. Assuming that all of the program costs at issue were incurred to comply with COMAR 20.53, the underlying rule making matter resulted in a complete makeover of the stated regulations, thus costs attributable to it clearly were not contemplated at the time the tariff provision was approved.

Furthermore, the Commission does not believe that it would be appropriate to force suppliers and their retail customers to bear the costs associated with the implementation of a program that benefits all ratepayers, as well as the competitive market as a whole. RM54 implemented stronger protections for customers choosing to receive service through a competitive supplier, as well as for all SOS customers given that they may at any time choose to switch to a competitive supplier, as well. RM54 made switching service safer, easier, and more efficient for all customers choosing to do so. These added securities also help to foster market competition, which the Commission finds to be a benefit to all customers.

For the foregoing reasons, the Commission denies, without prejudice, BGE’s proposal that RM54 program development costs be included in the calculation of the POR discount rate. Rather, if the Company so chooses, it may include RM54 costs in a future rate case, thereby allowing the recovery of such costs to be spread among all customers who may benefit therefrom. In such a rate case, the Commission will evaluate the appropriateness of allowing RM54 cost recovery from the balance of the fund developed as a result of previous and continued over-collections by the Company and encourages BGE to develop a strong record in this matter.

BGE is hereby directed to resubmit its corrected annual POR discount rate, omitting all program development costs associated with RM54, within seven (7) days of this Letter Order. Upon receipt of the revised tariff filing, the Commission will schedule BGE’s revised tariff filing for review at a future Administrative Meeting. Accordingly, the Commission hereby further suspends BGE’s initial tariff revisions (ML# 214942) an additional sixty (60) days for a total of 120 days from the proposed effective date of June 1, 2017, or until September 29, 2017.

By Direction of the Commission,

/s/ David J. Collins

David J. Collins

Executive Secretary

DJC/st

cc: Brian R. Green, Greene Hurlocker, PLC