Advance Pay REPs Seek to Link AMS Deployment to Proposed Prohibition on Advance Pay Products

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December 7, 2010

Several REPs currently offering prepaid service in ERCOT without the use of a customer prepayment device or system (defined here as advanced pay, also known as financial prepaid service) urged the PUCT to not eliminate the ability of REPs to offer prepaid service based on estimated usage for those customers who do not yet have a provisioned advanced meter (38675).  

As first reported in Matters, Staff has proposed amendments to Subst. R. 25.498 which would eliminate the ability of REPs to offer prepaid service using estimated usage, and would require them to use a customer prepayment device or system (10/11).

Filing as the REP Group, several advance pay providers or vendors, including Acacia Energy, Andeler Power, Apollo Power and Light, ePsolutions, Penstar Power, and Pocket Power noted that advanced meter deployment will not be complete until 2013.  Meanwhile, customers currently on an advance pay product (estimated by Staff as 3% of the residential market), would be forced by the rule to transition to a post-pay product -- "often at a considerable financial hardship, simply because they do not currently have a specific meter type installed," the REP Group said.

The REP Group said that advance pay products should only be prohibited for customers with provisioned advanced meters.  

For consumers not having an advanced meter installed at their location as of the effective date of the rule, prepay service for those customers under a new contract should not have to comply with amended Subst. R. 25.498 until 45 days after smart meter installation, the REP Group suggested.  “Beginning six months after the installation date [of the smart meter], a REP shall not renew a contract for prepaid service that does not comply with this section," the REP Group added.

Young Energy LLC also supported linking the prohibition on advance pay products to the deployment of advanced meters, and said that in the interim, the Staff's concerns regarding estimated advance pay products could be addressed through more stringent advanced pay rules, such as requiring true-ups within 90 days, requiring reporting of true-ups and deviations as part of REPs' performance measures reporting, and inviting Commission oversight of REPs' estimation methodology.

Main Street Energy, a start-up which said that it soon intends to seek a REP certificate and enter the ERCOT market, similarly said that more frequent true-ups for advance pay customers, such as every 60 days, could be required to permit the advance pay product to continue while advanced meters are installed.  Main Street Energy reported that due to the unfavorable economics of customer prepayment devices other than advanced meters, REPs will not likely offer prepaid service to customers without advanced meters unless it is through the advance pay model.

Main Street Energy raised concerns that customers served on advance pay products could, due to credit issues, end up on POLR if the advance pay product is prohibited and such customers do not yet have advanced meters.  While not taking a position on the issue, the Office of Public Utility Counsel did, "highlight[] its concerns to the Commission relating to those current residential electric customers obtaining prepaid service that may be left without a viable service provider or product," under the proposed rule.

Nations Power took a different approach.  Rather than delay the prohibition on advance pay products coincident to the smart meter deployment schedule, Nations Power asked that REPs offering prepaid service to a customer, in order to offer a product not relying on estimated usage, be allowed to direct the distribution utility to install an advanced meter at the new prepay customer's premises upon enrollment, regardless of the utility's smart meter deployment schedule.

Direct Energy, First Choice Power, and the Alliance for Retail Markets opposed any continuation of advance pay products once the amended §25.498 takes effect, suggesting a 60-day transition period for existing customers to be transitioned off of advance pay products.

Consumer Advocate Comments
Texas Legal Services Center and Texas Ratepayers' Organization to Save Energy offered the following recommendations:

• REPs should be prohibited from charging fees such as payment processing fees and "disconnection fees," with TLSC using the latter term to refer to fees for disconnection beyond the discretionary service fee established by the TDU.  OPUC said that the rule should limit payment processing and similar fees to a "reasonable" amount, with such fees included in the quoted per-kWh price in the Electricity Facts Label, similar to a recurring monthly customer charge.
• Prepaid electric service should not require the consumer to maintain a minimum balance.  OPUC suggested lowering the minimum balance from $75 to $30, if not eliminated entirely.
• Electric service to a prepaid customer should not be stopped unless the customer has spent all funds provided to the REP for electricity usage.
• All prepay contracts should be day-to-day and prohibit any form of termination fee for the customer choosing to take another service plan from the same REP or another REP.
• The Power to Choose website should clearly delineate prepaid products.  OPUC also suggested that customers be able to "filter" prepaid products similar to filters for fixed, green, etc.
• REPs offering a financing product (e.g. a branded credit card) should not be allowed to market the financing product during the marketing of their prepaid electric products, and such financing products should disclose their fees and whether their costs are in excess of the cost of paying by cash or check

TSLC and Texas ROSE also argued that the proposed rule is in violation of PURA § 39.101 since it accelerates the timetable for disconnection of service.  Under PURA, the disconnect timeline is based on the provision of a "bill," which does not occur in the prepay model.

REP Coalition Comments
Main points from the REP Coalition's comments include:

• The prohibition on estimated usage (and related charges based on such usage) should recognize that estimates remain necessary in limited circumstances where usage data from the Smart Meter Texas portal and TDUs is not readily available, and to recognize that the TDUs may estimate data posted to Smart Meter Texas when there are communications problems in the advanced meter network.
• The minimum balance of $75 should be limited to residential customers, as it may not cover the greater usage of small commercial customers
• Prohibitions on security deposits and termination fees should only apply to "electric service," and not apply to other services the REP may sell in conjunction with its electric service (e.g. power monitors and demand response thermostats).
• REPs should be allowed to collect a security deposit, similar to the applicable requirements for new customers, for customers transitioning from prepay to post-pay service
• The rule should explicitly allow REPs to impose a switch hold for prepay customers subject to a deferred payment plan (which may result due to delays in when a disconnection can be performed, particularly during extreme weather emergencies, under which the customer exhausts their prepay balance and compiles a debt to the REP).

The REP Coalition is comprised of: Acacia Energy, LLC; Andeler Power; Andeler Retail; Apollo Power and Light, LLC; CPL Retail Energy, LP; Direct Energy, LP; ePsolutions, Inc; Fulcrum Retail Holdings LLC (Amigo Energy and Tara Energy); Gexa Energy, LP; PenStar Power, LLC; Pocket Power; TXU Energy Retail Company LLC; and WTU Retail Energy, LP.

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