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PUCT Staff Proposal Would Prohibit Offering of Estimated Prepay Products

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October 11, 2010

PUCT Staff have filed a proposal for publication in Project 38675 for new Subst. R. §25.498, governing prepaid service, under which REPs would be prohibited from offering prepaid service unless the REP uses a customer prepayment device or system (CPDS).

Staff estimated that approximately 21 REPs are providing prepaid service in ERCOT.  Staff calculated that 10 of those REPs are presently providing service to customers under the existing §25.498, which governs service using a customer prepayment device or system.  At least four of these 10 REPs have offered prepaid service to customers without advanced meters, Staff said.

The remaining REPs offer prepaid service using estimates of usage.  Staff calculated that the number of residential customers that currently receive prepaid service without the use of a customer prepayment device or system is less than 3% of the residential customer base in ERCOT.

"The use of estimated consumption as the basis for payment gives REPs considerable discretion in determining payments, and customer complaints made to the commission suggest that there may be considerable abuse of this discretion.  Because of the fact-specific nature of these consumption estimates, it is difficult for the commission to ensure that REPs do not abuse their discretion in making these estimates," Staff said in explaining the proposal to prohibit the use of estimated prepaid service.

"REPs providing prepaid service without CPDS not only base payments on estimated usage, they also send disconnection notices to customers and disconnect customers based on estimated usage.  As a result, customers may receive disconnection notices and actually be disconnected based on inaccurate estimates of their consumption," Staff added.

Staff proposed a six-month phase-in period for the elimination of estimated prepaid service, as well as other provisions of the new §25.498.

Among the other new provisions of the draft §25.498 is that a REP may not require a customer to have a minimum positive prepayment balance of in excess of $75.  REPs would not be permitted to base charges on estimated usage, other than the minimum balance.

Under Staff's draft, a REP providing prepaid service shall not require security deposits, but may charge and collect early termination fees for contracts with a term of more than one month.  

Furthermore, a REP providing prepaid service would be required to provide a means by which the customer may make payments for service, "by phone, internet, or other means that can be accomplished at the customer's premises, or at a location no farther than five miles from the customer's premises."  

The current §25.498 allows a REP to meet this requirement through a location "near" the customer's premises, with no explicit distance requirement.

The proposed new §25.498 would also reflect recent changes in other Substantive Rules, such as allowing REPs to impose a switch hold on prepay customers who are subject to a deferred payment plan, and prohibiting the offering of prepay service to both critical care and the new category of chronic care customers.

Staff's revised §25.498 provides that a REP shall request that the TDU reconnect service (or perform reconnection itself if using its own prepayment device) within one hour of satisfactory correction of the reasons for disconnection.

   
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