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PA Bulletin, Doc. No. 06-1147

NOTICES

Insuring Consistent Application of 52 Pa. Code § 56.12(7) Equal Monthly Billing; Doc. No. M-00051925

[36 Pa.B. 3065]
[Saturday, June 17, 2006]

Public Meeting held
June 1, 2006

Commissioners Present:  Wendell F. Holland, Chairperson; James H. Cawley, Vice Chairperson; Bill Shane; Kim Pizzingrilli; Terrance J. Fitzpatrick

Final Interpretive Order

By the Commission:

   On December 8, 2005, the Commission entered an order setting forth a proposed interpretive rule regarding 52 Pa. Code § 56.12(7) pertaining to the establishment and availability of equal monthly billing or budget billing for utility customers. Section 56.12(7) provides as follows: 52 Pa. Code § 56.12(7) provides:

''Equal monthly billing. A gas, electric and steam heating utility shall provide its residential ratepayers with an optional billing procedure which averages estimated utility service costs over a 10-month, 11-month or 12-month period to eliminate, to the extent possible, seasonal fluctuations in utility bills. The utility shall review accounts at least three times during the optional billing period.''

   Based on the Commission's proposed interpretation, when a customer enrolls in a budget billing program, the utility must use that customer's consumption from the previous 10, 11, or 12 month period when determining the customer's budget billing payment, or base the budget amount on a valid estimate of the potential use for a 10, 11, or 12 month period when the customer has no prior history. As such, equal monthly billing or budget billing programs based on a usage period that averages less than 10 months would be invalid. In that order, the Commission also noted that utilities are permitted to review customer accounts a minimum of three times during the budget billing period and make necessary adjustments.

   The goal of budget billing is to allow new customers, and existing customers not previously enrolled in a budget billing program, to obtain the maximum benefits from the program, while benefiting utilities by reducing their exposure to uncollectible expenses. To accomplish this aim, there can be no restriction on customers' ability to avail themselves of budget billing procedures based upon a 10, 11, or 12 month past usage period.

   Finally, the Commission set forth other elements of an acceptable budget billing program:

   *  Budget billing must be available to all utility customers with residential end use irrespective of the rate the account is billed.1

   *  Based on well-established case history, budget billing must be the method by which customers in arrears pay current bills while liquidating the past due amounts owed the utility.2

   *  Budget accounts are to be routinely monitored and adjusted consistent with the Commission's regulations to prevent over or under collections to the extent possible.

   *  Any tariff provision that is inconsistent with the Commission's interpretation of its regulation is deemed null and void.3

   The Commission has solicited comments pursuant to Section 703(g) of the Public Utility Code, 66 Pa.C.S. § 703(g), from all interested parties in response to the proposed interpretative rule on whether the interpretative rule is clear or whether a policy statement is warranted. The Commission served the December 8, 2005 order on all jurisdictional electric, gas, water, and steam heating companies, the Office of Consumer Advocate, the Office of Small Business Advocate, the Office of Trial Staff, the Energy Association of Pennsylvania, and the Public Utility Law Project.4

   The order was published in the Pa. Bulletin on December 24, 2005 at 39 Pa.B. 6970. The comment period ended January 3, 2006. Comments were filed by PPL Electric Utilities Corporation, PPL Gas Utilities Corporation, Columbia Gas of Pennsylvania, Inc., the Office of Consumer Advocate, the Office of Trial Staff and the Energy Association of Pennsylvania. The comments and our disposition of them will be discussed below.

PPL Electric and Gas Utilities

   PPL Electric Utilities Corporation and PPL Gas Utilities Corporation filed joint comments. The companies will be referred to herein as PPL. PPL believes that the Commission's interpretative rule in this order is clear and does not require the development of a policy statement for the following reasons. In accordance with the Commission's regulations, PPL customers can enroll in the companies' budget billing plan during any month of the year. PPL promotes this payment option several times yearly through bill inserts and routinely during payment agreement negotiations. PPL Electric customers can enroll in budget billing using the website or PPL's interactive voice response system. PPL Gas customers must call to enroll in the program. PPL imposes no budget billing restrictions regarding the residential rate class. PPL also offers budget billing to commercial customers as well.

   PPL Electric states that it offers a 12 month budget billing plan and conducts quarterly reviews of customer payment amounts during the year. PPL Gas offers a 12 month budget billing plan and conducts reviews in October, January and April. The primary purpose of these reviews is to adjust the monthly budget amount, if appropriate, in order to avoid ending the budget year with a large balance owed to either companies or a large credit owed to the customer. If the customer owes more than $4, the customer has the option of paying the full amount upfront or paying it in 4 equal installments over the next 4 billing periods. If the customer has a budget billing credit, PPL Electric applies the credit to the customer account.

   If a PPL Gas customer owes a balance, PPL divides the amount of the balance owed by 12 months and adds that amount to the new budget billing amount for the next year. If a gas customer has a credit balance, PPL divides the amount of the balance by 12 months and lowers the budget billing amount accordingly.

   It is the opinion of PPL that utilities must offer residential customers an optional billing procedure that averages utility service costs over a period of 10, 11, or 12 months. Based upon PPL's application of Section 56.12(7), PPL is of the opinion that the Commission's interpretative rule in this order is clear and does not require the development of a policy statement.

Columbia Gas of Pennsylvania

   In its comments, Columbia states that it supports the comments filed by the Energy Association of Pennsylvania, which will be discussed later, and agrees that no policy statement is necessary concerning this issue. Columbia questions the need for the interpretative order itself, in light of the fact that the regulation is nearly thirty years old and no interpretive order or policy statement has been required to this point.

   Columbia further states that it implemented Section 56.12(7) shortly after it was promulgated with the involvement and support of the Commission's Bureau of Consumer Services (BCS). To the extent a different interpretation is now being pursued, Columbia suggests that it could be addressed as the initial interpretation had been done, through discussions with BCS, rather than through an interpretative order or policy statement.

   Columbia submits that ''the plain language of the regulation does not prohibit utilities from basing equal monthly billing on a usage period that averages less than 10 months or greater than 12 months. Instead, the explicit language of the regulation requires utilities to provide an optional billing program which averages estimated utility service costs over a 10, 11, or 12 month period. In other words, as long as a utility provides customers with an optional billing program that averages estimated service costs over a 10, 11, or 12 month period, the utility may also base budgets on periods of less than 10 months or greater than 12 months for those customers who do not take advantage of the optional billing procedure required by regulation.'' Columbia also avers that ''the plain language of the regulation requires utilities to take an action, it does not prohibit one; there is no prohibitory language in the regulation that would prevent a utility from offering budgets calculated on time periods other than 10, 11, or 12 months, as long as it also offers a budget billing program that meets the requirements of the regulation.'' Columbia comments at p. 2, 3.

   In addition, Columbia submits that ''nothing in the language of the regulation requires budget-billing programs to be available on demand (i.e., ''rolling'' enrollment throughout the year).'' Rather, Columbia believes that both the language of the regulation as well as its experience with BCS in implementing this regulation over the last 20 years, suggest that the ultimate goal of the regulation is to levelize the seasonal fluctuations in service charges to ease the burden of paying high seasonal bills, and it submits, rolling enrollment will not always achieve this goal. Columbia notes that it uses a ''budget season concept.'' Customers are notified annually through a billing insert that they can enroll in the budget program in August. Their budget year continues through the next July at which time it is reconciled and the customer is automatically enrolled in the program for the following year by paying the projected budget amount. Columbia believes that its budget billing season is precisely in line with the regulation.

   Columbia advises that its program is designed so that the annual true-up occurs in summer, when gas bills are at their lowest. This design feature of the program prevents the true-up from occurring in the winter months, when customers' consumption and bills are already at their highest.

   Columbia notes that its Customer Information System was designed and implemented in the 1980s with input from BCS. Columbia states that during the creation of its new billing system, BCS did not ask Columbia to program its system to provide for enrollment anytime during the year. Columbia asserts that during meetings with BCS personnel, BCS agreed with Columbia's representatives that it would be in the customer's best interest not to establish a customer on a rolling 10, 11, or 12 month budget billing program during the winter period that could require the budget true-up during the winter months, particularly with the relatively high gas costs that were in effect at that time. Columbia opines that creating a scenario such as this would cause seasonal fluctuations in utility bills and potential payment problems for customers, which is exactly what the regulation attempted to eliminate. Columbia submits that its traditional budget-season concept eliminates this problem.

   Columbia also suggests that the 10, 11 or 12 month language of the regulation was likely intended to address the reality that rolling enrollment was not contemplated by the regulation, not in the best interest of customers, nor even possible with the available technology of the late 1970s and early 1980s. If rolling enrollment were contemplated, or in the best interest of customers or even possible, there would be no reason for the regulation to permit 10, 11 or 12 month budget periods because this-- by definition--would not ''eliminate, to the extent possible, seasonal fluctuation in utility bills.'' Columbia states, ''If rolling enrollment were desirable or possible, the regulation would have been written to require all budgets to fully consider all 12 months so as to entirely eliminate seasonal fluctuation, rather than permit budgets based on 10 months which could unnecessarily increase a customer's monthly payments.''

   Furthermore, Columbia suggests that the inclusion of the 10 month and 11 month language supports the notion that the regulation contemplated a budget season of one to three months, with an annual true-up during the summer months so as to protect customers from seasonal fluctuation to the fullest extent possible.

   In addition to Columbia's budget billing program required under the regulation, Columbia will begin offering an Extended Budget Payment Plan to its customers for this winter only due to the unprecedented increase in gas prices. This plan will allow the customer to enroll in a budget-billing program, which will spread the payment of their gas bills over a longer period of up to 18 months. The true-up for the Extended Budget Promotion will be in July 2007.

   Columbia states that if the Commission now believes that it is in the customer's best interest to permit them to enroll in the basic budget-billing program at any time of the year, and to have a true-up during the winter months, Columbia will change its system to accommodate that process. However, Columbia notes that this differs from the philosophy existing when Columbia's budget-billing program was designed, and some customers will likely complain about the change in which they would have to true-up their budget during the winter months instead of during the summer months when bills are lower.

   With regard to other issues raised as elements of an acceptable budget billing program, Columbia generally agrees with the interpretation; however, Columbia sees no need for an interpretive order or for a policy statement. Specifically, Columbia agrees that budget billing: (1) should be available to all utility customers with resident end-use respective of the rate the account is billed; (2) must be the method by which customers in arrears pay current bills while liquidating the past due amounts owed the utility; and (3) accounts are to be routinely monitored and adjusted consistent with the Commission's regulations, however, Columbia adds that a true-up is also necessary.

   In conclusion, it is Columbia's opinion that utilities should have the flexibility to offer various types of payment plan options to its customers, which include budget billing, as long as they provide a program that gives customers the option of spreading their consumption over 10, 11, or 12 months. Columbia also believes that traditional ''budget-season'' type programs are the most appropriate means of implementing the intent of the regulations because they consider the impact of the true-up on the customer and guarantee that the true-up will occur in periods where the customer's bill is expected to be low. Nevertheless, if the Commission desires to move away from ''budget-season'' type programs and permit true-ups to occur during the months of high bills, Columbia is prepared to modify its information system to accommodate the Commission's new interpretation.

Office of Consumer Advocate

   In its comments, the Office of Consumer Advocate (OCA) states that it supports budget billing as a critical tool for enabling customers of all energy and water utilities to manage their utility expenses responsibly and especially important in aiding payment-troubled customers to keep up with current bills while paying down past due amounts through payment arrangements. Additionally, OCA supports the Commission's December 8th interpretation, in which the Commission declared that there can be no restriction on customer's ability to avail themselves of budget billing; OCA also supports the declaration that budget billing based on usage periods of less than 10 months is invalid; as well as the four elements deemed part of an acceptable budget billing program listed on pages 2 and 3 of the order. However, the OCA has identified several areas in which it submits that additional guidance from the Commission would be beneficial to consumers.

   Because of the effectiveness of budget billing, OCA would support even greater outreach and encouragement of low-income or payment troubled customers to use budget billing. OCA suggests that every contact, whether it be in negotiating a payment arrangement, providing a reminder of an overdue bill, or otherwise, be used as an opportunity to encourage customers to take advantage of budget billing. OCA submits that it would be appropriate for utilities, if they do not already do so, to encourage all new applicants for service to consider utilizing budget billing. OCA is of the opinion that this is particularly important for natural gas customers. Use of budget billing is one way customers can cope with the price volatility that exists in the market for natural gas and the impact it has on their individual bills.

   OCA's experience with the use of budget billing in the natural gas industry leads it to conclude that it would be in the public interest for the Commission to provide further guidance on the use of § 56.12(7) by natural gas utilities in particular.

   OCA's first concern stems from the introduction of quarterly adjustments for Purchased Gas Cost (PGC) rates. The persistent volatility in natural gas costs has meant an almost certain quarterly adjustment in PGC rates. In particularly volatile periods, these quarterly adjustments to PGC rates can be quite large. OCA states that because, under the Commission's rule, budget bills are adjusted only three times per year, there is the potential for a sizable change in the budget bill amount when more than one PGC increase is reflected in a given budget bill adjustment. To eliminate this possibility, the OCA encourages the Commission to offer additional guidance directed to natural gas utilities, recommending that they move to quarterly budget billing adjustments that are tied to the quarterly changes in their PGC rates. Because there is the possibility of four PGC changes in one year and only three budget billing adjustments, at least one of the budget billing adjustments may reflect two intervening PGC changes. In such cases, if the intervening changes are increases, it is very possible at the next budget billing adjustment, the customer could see a sharp increase in the amount billed.

   OCA submits that if one of the objectives of budget billing is to establish some degree of predictability for the customer as to the amount he or she will owe for utility service, the current situation with natural gas prices plays havoc with achieving that objective. Indeed, under current conditions, that objective may be difficult to reach. Perhaps a more realistic goal would be to smooth the increases, so that no single adjustment produces rate shock. It is for this reason that OCA proposes quarterly budget billing adjustments for natural gas utilities that are linked to quarterly adjustments in PGC rates.

   OCA avers that the language of § 56.12(7) lends itself to this possibility. It states that, ''The utility shall review accounts at least three times during the optional billing period.'' OCA notes that nothing prevents a utility from performing more than three reviews. Where doing so would aid in smoothing potentially steep mid-term increases in budget billing amounts, and likely promote better payment performance on the part of customers, it seems it would be in the public interest for the Commission to urge natural gas utilities to utilize § 56.12(7) in this way.

   The Commission's December 8th order emphasizes that § 56.12(7) allows budget billing to be based on a 10, 11, or 12 month cycle. OCA submits that because of the high natural gas costs that have significantly inflated the amount of monthly budget bills, twelve months should be the standard budget billing period utilized by natural gas companies. Spreading the costs over any shorter period will only make already high bills even higher. Therefore, natural gas utilities should be encouraged to use the 12 month period. To the extent that they offer shorter options to customers, the companies should clearly explain to customers the potential for increased bills if such an option is chosen.

   Another concern of OCA is its understanding that not all utility budget billing plans allow for the rollover of year-end debit balances into the following year's budget billing obligation. For instance, some programs require customers to pay the entire under collection in a lump sum at the end of the billing cycle. In cases where rollover is permitted, companies vary as to the number of months they allow for amortization of the balance. OCA's view is that permitting rollover should be the standard practice for all utilities and that the amortization period should extend through the full twelve months of the following budget year. OCA submits that at the end of the billing cycle, if a balance is owed, the balance should become part of the next 12-month budget bill, unless the customer affirmatively chooses to pay the balance due in a lump sum. Allowing such treatment offers yet another way to smooth customers' bills. OCA urges the Commission to encourage all energy and water utilities to design their budget billing programs to permit rollover of year-end customer balances into the following year's budget calculation and to permit amortization of that balance over the entire 12 month period.

   Lastly, OCA is concerned with the compression of mid-term adjustments. For instance, as gas companies, and presumably other utilities, conduct their mid-term reviews and adjustments of budget bills, they attempt to target a zero balance for the end of the budget billing period. In doing so, they force any corrections to be made over ever-shorter periods of time. For example, if the first review occurs four months into the budget year, any projected shortfall would be spread over the remaining eight months. If the second review occurs seven months into the year any shortfall would be spread over just the five remaining months of the year. Where the shortfall is sizeable as it might be when there has been a sharp rise in natural gas costs since a previous adjustment, compressing recovery into such a short time period can itself produce large increases in the budget amount. Instead of attempting to recoup these amounts over the remainder of the budget year, the OCA recommends that mid-term adjustments be calculated to permit recovery of any shortfall over the succeeding twelve months. The result would be that budget bills would be put on a ''rolling'' 12 month basis. One byproduct of such a process would be that annual true-ups would be foregone since each adjustment in effect ''trues up'' and rolls the correction into the next 12 month period.

   In the interest of helping unexpectedly large (and potentially unaffordable) increases in budget bills from compressing corrections into short periods, the OCA recommends that companies consider utilizing a rolling 12 month budget billing program. The OCA urges the Commission to the consider each of these recommendations in developing a final interpretive rule or policy statement on budget billing.

Office of Trial Staff

   In its comments, OTS stated that it supports the Commission's interpretation of its Equal Monthly Billing regulations, specifically, as it relates to the application of § 56.12(7). It would seem that the establishment of an equal monthly billing program based upon consumption history of less than 10 months could potentially create an artificially high average bill going forward and that the most equitable process in establishing budget billing would be to use a longer consumption history.

   Furthermore, OTS supports the Commission's clarification of other elements of an acceptable budget billing program. OTS states that the requirement that budget accounts be routinely monitored and adjusted consistent with the Commission's regulations to prevent over or under collections is of particular concern, especially in this era of gas price volatility which could result in customers being responsible for a higher than usual true-up billing at the end of the budget billing cycle. OTS submits that it should be clarified in the context of an interpretative rule whether adjustments to budget ac-counts should be made based solely upon a change in costs of purchased gas or whether they could, or should, also include an adjustment to recover any over/under recovery that has occurred to that point in the budgeting.

   OTS also suggests, that with respect to true-ups, clarification is needed regarding the appropriateness of allowing a utility to spread a large true-up amount (a true-up amount more than 100% of the current budget billing amount) over the remaining term of the budget billing plan, or whether the true-up amount should be spread over the course of several months following the end of the budget billing plan. OTS submits, that in this context, it would be acceptable for the Commission to establish a guideline as to what constitutes a ''large'' true-up amount and the process by which the utilities should seek to recover that true-up amount.

Energy Association of Pennsylvania

   In its comments, EAP states that it represents 12 major electric and natural gas energy distribution companies in Pennsylvania. EAP states that all of its members provide budget billing programs which have been sanctioned by BCS. Moreover, in keeping with the Governor's Stay Warm PA initiative this year, EAP's members have been and will continue to promote their individual budget billing programs.

   Inasmuch as budget billing programs have been mandated by PUC regulations for over 25 years, EAP does not see the need for a policy statement on this issue. EAP believes that the current regulation is sufficient. However, with respect to certain of its natural gas distribution company members, existing budget billing programs provide for a customer to enroll early in the fall so as to ensure that the annual reconciliation or ''true-up'' occurs during the summer months when gas prices have been historically low. Accordingly, in order for these companies to maintain a summer reconciliation for all customers, if a customer opted for budget billing in a time-frame other than the annual enrollment period, the initial budget amount could be set for a period of less than 10 months. Once the customers go through his first reconciliation, the budget would be paid over a 12 month period allowing for summer reconciliation. EAP avers that this program design, which was discussed with BCS, was employed in order to protect customers from seasonal fluctuations, to the fullest extent possible by setting the reconciliation period during the summer for all participants.

   Other natural gas distribution company members' existing budget programs provide for customers to enroll at any time throughout the year and also provide for an annual summer ''true-up'', but do not ''true-up'' new budget customers in their first year of participation in the program. This program design may allow for an initial budget period longer than 12 months.

   EAP states that the interpretative rule set forth in the December 8, 2005 order does not explicitly acknowledge the ''summer reconciliation'' policies by some of the natural gas distribution companies and may require that all utilities allow for a reconciliation on the anniversary date of enrollment, regardless of the time of year in which enrollment occurs. Natural gas distribution companies do not believe that this is mandated by the interpretive rule, inasmuch as it does not benefit their customers to have a winter reconciliation.

   Accordingly, EAP respectfully requests that the PUC acknowledge as reasonable and appropriate summer true-up policies. It would not be reasonable or good for customers if the PUC were to disallow summer true-ups, and/or to require a full 10, 11, or 12-month initial budget billing period, thereby eliminating any consistent reconciliation period and creating reconciliation periods that would fall throughout the year. In addition, such a ruling would impose significant additional costs on the industry because certain PA natural gas distribution companies would be required to undertake extensive modifications to their billing systems in order to comply.

   If, however, the PUC were to order reconciliation on the anniversary date of enrollment, EAP, on behalf of those affected members, respectfully requests that the PUC provide a reasonable amount of time (six months from the issuance of a final Commission Order) to allow the affected companies the opportunity to make the necessary programming modifications, test their system, and finally, implement a design which provides for reconciliation throughout the year based on enrollment date.

Disposition

   The initial determination the Commission must make is whether a policy statement or further interpretive rule regarding § 52.12(7) is necessary. An interpretive rule does not establish a binding standard of conduct, and need not be promulgated in accordance with the Commonwealth Documents Law. Lowing v. Public School Employes' Retirement Board, 776 A.2d 306, 309 (2001). ''For an interpretive rule to be viable, however, it must genuinely track the meaning of the underlying statute, rather than establish an extrinsic substantive standard.'' Id. Similarly, a policy statement does not have the force of law, and is merely interpretive in nature. Shenango Township Board of Supervisors v. Pa. PUC, 686 A.2d 910, 914 (1996). ''The value of a policy statement is only persuasive, so long as it represents an accurate interpretation of the relevant statute or other authorities from which it is derived.'' Id. at 914. The only legal requirements to adopting a policy statement are that the order be published in the Pennsylvania Bulletin and codified in the Pennsylvania Code. 45 Pa.C.S. §§ 702, 221. EAP, PPL and Columbia Gas take the position that an interpretive rule or policy statement is unnecessary. Based on our review of the practices and issues raised with respect to budget billing, we find that issuance of this Final Interpretive Rule will provide beneficial and necessary guidance to utilities and ratepayers alike.

   As reported by the various responding utilities, several different budget billing programs are being offered to customers. All commentators agree that budget billing is the most effective way to levelize monthly utility bills and aid payment troubled customers. Also, all agree that it is in the best interest of consumers and utilities that consumers be able to afford their utility bills. As such, we must be mindful of the effect that large utility bills will have on payment troubled and low income customers.

Rolling Enrollment

   Based upon the comments, we reiterate the statements made in our December 8th order. We hereby clarify that all residential customers should be allowed to enroll in a budget billing program on a rolling basis, that is, enrollment should be permitted at any time during the year. This will allow customers to obtain the maximum benefits from the program, while benefiting utilities by reducing their exposure to uncollectible expenses. Utilizing a rolling basis program will allow customers who find themselves unable to make large monthly utility bill payments the opportunity to budget their finances so that consistent monthly payments can be made.

   Therefore, the permitted parameters of an acceptable budget billing program are as follows. Every utility budget billing program should allow the enrollment of new customers, and existing customers not previously enrolled in a budget billing program on a rolling basis. To accomplish this aim, there can be no time restriction on customers' ability to avail themselves of budget billing procedures based upon a 10, 11, or 12 month past usage period.

Past Usage Period to Estimate Budget Billing Amount

   In addition, it is acceptable for an initial budget period to exceed 10, 11 or 12 months, but basing equal monthly billing on a usage period that averages less than 10 months violates the Commission's regulations and is therefore invalid. This interpretation, which is consistent with the regulation, means that when a customer enrolls in a budget billing program, the utility must use that customer's consumption from the previous 10, 11, or 12 month period when determining the customer's monthly budget billing payment for the year. If a new customer with no prior history applies for enrollment in a budget billing program, the monthly budget amount for the year must be based on a valid estimate of potential use for a 10, 11, or 12 month period. 52 Pa. Code § 56.12(7).

Periodic Review of Budget Billing Amount

   Pursuant to current regulations, utilities are permitted to review customer accounts a minimum of three times during the budget billing period and make adjustments as necessary to the monthly budget billing amount. The word ''minimum'' leaves room for more frequent review periods if necessary. In keeping with the spirit and intent of this regulation, as recommended in OCA's comments, we encourage natural gas companies to review and adjust budget bills quarterly in order to coincide with their PGC adjustments. Quarterly adjustments to budget bills will help customers cope with the price volatility that exists in the natural gas industry.

Budget Billing Year-End True-ups

   OTS recommended that we issue a clarification on annual true-ups and define what is considered a large true up. A true-up occurs when the company calculates its charges and the customer's usage at the end of the annual budget billing period to determine if the customer has underpaid or overpaid for services. Ordinarily, the customer should be given 3-6 months to pay off that amount. If the annual true-up is 100% or more of the monthly billing amount, the customer should be allowed to roll that amount into the next budget billing period for payment over 12 months. We expect utilities to exercise good judgment in dealing with these situations.5 If, however, an overpayment has occurred, the customer should be given a choice to either receive a lump sum payment refund or have the overpayment spread over the next budget year to possibly decrease the monthly budget billing amount.

Winter True-ups

   Columbia and EAP have both stated that winter true-ups for heating customers are undesirable. We agree. The true-up period should occur in the spring and summer months so as to not inflate the budget amount when bills are already at their highest during the winter heating season. For instance, if the customer enrolls in the budget billing program in the winter, the true-up should occur after the next heating season in the spring and summer.

Customer Outreach

   In regard to customer outreach, we agree with the OCA and strongly encourage utilities to use every contact with a low income or payment troubled customer as an opportunity to encourage them to take advantage of budget billing. Contacts include, but are not limited to, negotiating a payment arrangement and providing a reminder of an overdue bill.

   Therefore, based on our review of the comments and our interpretation of § 56.12(7), these elements are essential to an acceptable budget billing program:

   *  Budget billing must be available, on a rolling enrollment basis, to all utility customers with residential end use irrespective of the rate the account is billed.6

   *  Based on well-established case history, budget billing must be the method by which customers in arrears pay current bills while liquidating the past due amounts owed the utility.7

   *  Budget accounts are to be routinely monitored and adjusted at least three times per year, consistent with the Commission's regulations to prevent over or under collections to the extent possible.

   *  Natural gas utilities should adjust budget bills at least four times per year, in conjunction with their Purchased Gas Cost (PGC) rate adjustments.

   *  The budget billing payment period must be a minimum of 12 months, with no annual true-ups occurring during the winter heating season.

   *  If the true-up amount is less than 100% of the budget amount, customers should be given 3-6 months to pay off that amount.

   *  If the true-up amount is 100% or more of the budget amount, customers should be given 12 months to pay off that amount.

   *  Any tariff provision that is inconsistent with the Commission's interpretation of its regulation is deemed null and void.8

   As requested by EAP, we will allow affected natural gas, electric and steam heating companies six months from the entry date of this Order to make the necessary programming modifications, test their system, and finally, implement a design which complies with this order. By allowing rolling enrollment in budget billing programs and mandating adjustments to the budget billing amount at least three times per year, we reduce the likelihood of having large true-ups at the end of the budget year. Given the utilities' obligation to review budget billing amounts 3-4 times per year, large true-ups should be the exception. By doing this we are providing a way for companies to smooth customer bills and decrease their exposure to uncollectible expenses. We strongly encourage utilities that do not presently have these elements in place to work with BCS to ensure that their new system contains the elements that comply with the letter and intent of this Final Interpretive Order. The Commission will incorporate this Final Interpretive Order in the next Chapter 56 rulemaking.

Therefore,

It Is Ordered That:

   1.  A copy of this Final Interpretive Order be published in the Pennsylvania Bulletin.

   2.  A copy of this Final Interpretive Order be served on all jurisdictional electric, gas, water, and steam heating companies, the Office of Consumer Advocate, the Office of Small Business Advocate, the Office of Trial Staff, the Energy Association of Pennsylvania and the Public Utility Law Project.

   3.  Companies with computer systems unable to comply with this order are given six months from the entry date of this Final Interpretive Order to comply.

JAMES J. MCNULTY,   
Secretary

[Pa.B. Doc. No. 06-1147. Filed for public inspection June 16, 2006, 9:00 a.m.]

_______

1  See 52 Pa. Code § 56.1 (relating to definition of residential service).

2  Mary Frayne v. PECO Energy Company, C-20029005 (Order entered September 10, 2003).

3  See 52 Pa. Code § 56.223 (relating to inconsistent tariff provisions).

4  Our regulation requires electric, natural gas steam heating utilities to offer budget billing. Water utilities may also offer budget billing.

5  Given that utilities are obligated to review and adjust the monthly budget billing amount at least three times during the year, the frequency of annual true-ups of 100436000r more should be relatively low.

6  See 52 Pa. Code § 56.1 (relating to definition of residential service).

7  Mary Frayne v. PECO Energy Company, C-20029005 (Order entered September 10, 2003).

8  See 52 Pa. Code § 56.223 (relating to inconsistent tariff provisions).



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