Bill Stabilization Adjustment Audit Report

Pepco DC | 2023

In response to stakeholders’ concerns around Pepco DC’s Bill Stabilization Adjustment (“BSA”, a full decoupling mechanism) and its associated growing deferral balance, Atrium was engaged to perform an evaluation of the processes, procedures, mechanics, and internal controls surrounding Pepco DC’s BSA. The audit period extended from September 2018 through March 2022, fully encompassing the period associated with the COVID19 pandemic. Pepco’s decoupling mechanism insulated utility revenue from changes in sales volume, weather, and economic activity, based on revenue forecasts developed prior to the pandemic. The mechanism capped monthly recoveries at 10 percent of the total distribution charge, with any excess or shortfall captured in an associated deferral account.

CHALLENGE

Atrium’s challenge included breaking down the complexities of the BSA mechanism such that it could be understood by non-financial readers and striking the appropriate balance between the divergent interests of stakeholders, particularly with respect to the impacts of COVID. The regulatory process allowed for stakeholder review and comment of our Audit Report and allowed Atrium an opportunity to incorporate and address stakeholder perspectives in our final Report.

EXPERTISE

Atrium’s review focused on electric utility best practices (including a regional survey of electric utility decoupling mechanisms), case precedent, and policy objectives set out by the DC Commission. Atrium’s scope of work included an independent analysis of Pepco’s BSA deferral balance by customer class, identifying and categorizing key drivers of the growing balance; and included substantive testing of processes and controls.

OUTCOME

Atrium’s Audit Report documented and supported our assessment, detailed the findings identified in the course of our work, and made recommendations for the Utility and the Commission to consider for possible enhancements to the BSA mechanism and processes. Atrium’s report will be relied upon by Pepco, stakeholders and the Commission in determining the future of the BSA mechanism in Washington DC.

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