Comments Filed by Clean Energy Parties Regarding Utility Consolidated Billing
September 3, 2019
Members of the Clean Energy Parties have commented specifically about consolidated billing and our general support for utility consolidated billing (“UCB”) in April 2017 and July 2017. The CEP remain supportive of implementing Utility Consolidated Billing with Purchase of Receivables (“UCB-POR”) as an option for CDG providers (CDG providers would be allowed to opt in, but it would not be mandatory). If implemented properly with a reasonable fee structure and in a transparent, easy-to-understand customer interface, UCB-POR could provide direct benefits to CDG customers—including low-to-moderate income (“LMI”) subscribers—and help the state achieve its clean energy and equity goals by enabling more community solar development at lower cost.
UCB is a program in which the utility posts not only the CDG credit on a CDG subscriber’s bill, but also the charge for the CDG subscription, such that the customer pays only one bill, and the utility remits the portion of the payment that is for the CDG subscription to the CDG provider. Under UCB-POR, the utility would also purchase the receivables of the CDG provider; in other words, the utility would, for a reasonable fee, purchase the “debt” that the community solar provider expects to recover from subscribers, and then the utility would become responsible for collecting those subscriber fees. UCB-POR is a familiar concept from the retail supply arena and there are lessons learned that could be leveraged to implement it in New York for CDG.
Moving to a CDG market with UCB-POR will have an immediate impact on both CDG customers and CDG developers.
From the customer’s point of view, consolidated billing fundamentally changes the relationship between the customer and the CDG provider by placing all CDG costs and savings on the subscriber’s utility bill. This will enhance the customer experience for those that prefer a single bill. For LMI customers this is especially important, because increasing the number of bills that LMI customers have to pay is a significant barrier—even if the result of their participation in the CDG project is a net savings.
For CDG developers and providers whose project financing models require subscriber credit checks, UCB-POR would enable greater participation from customers with limited or no credit. Even for potential CDG subscribers with good or excellent credit scores, being subjected to a credit check for a community solar subscription is a barrier to participation. UCB-POR removes this barrier to participation for customers regardless of credit history by substituting the subscriber’s credit risk with a default risk that will be pre-determined by the POR Discount (i.e., the fee charged by the utility to the CDG provider participating in UCB-POR).
Additionally, financing parties will be more comfortable with this approach because as credit checks are more widely eliminated, the addressable market of CDG participants is increased allowing greater substitutability of CDG customers for transfers and cancellations. As a result, the overall risk profile for some projects and CDG providers can improve and their assets and business models become more attractive and cost-effective from a financing perspective. While the financial community has become increasingly comfortable with CDG as a product offering in general, an innovation like UCB-POR can accelerate the attractiveness of CDG to additional financiers and bring down financing costs further.
In addition to reducing financing costs, UCB-POR reduces billing and collections costs for CDG providers who opt in, because they no longer have to pay to send bills, monitor collections, or experience lost revenue as a result of customer non-payment. Thus, UCB-POR has the potential to reduce soft costs associated with CDG project development and operations.
However, it is important to remember that any soft cost reductions associated with UCB-POR will be offset to some extent by any fees the utility will charge to offer the UCB-POR service. Furthermore, many CDG providers will continue to engage in customer acquisition, customer relationship management and customer churn, even if no longer conducting the actual billing and collections. Therefore, the amount of soft cost reductions achievable from UCB-POR should not be over-estimated—the actual cost savings to project owners will be heavily dependent on the fee structure approved by the Commission.