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Oncor Rate Filing Would Modify Demand Charge Rate Design

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January 10, 2011

Oncor has filed a rate case with the PUCT which would significantly modify how demand charges are applied to customers of REPs in the Secondary Service Greater than 10 kW class (38929).

Oncor's proposed change in the Secondary > 10 kW Class would affect the application of the demand ratchet to customers with loads that are greater than 20 kW and have an annual load factor of less than 25%. Oncor said that the proposal is intended to reflect cost causation principles while at the same time removing the demand ratchet provision for all low load factor customers.

Under Oncor's filing, the Distribution System Charge for all such customers would be based on their actual monthly demand and the load factor group ("LF Group") associated with their historical load factor for the most recent calendar year.

Oncor proposed four distinct LF Groups as follows:

1) Annual load factors less than 10% (the 0-10 Group);

2) Annual load factors of 11% to 15% (the 11-15 Group);

3) Annual load factors of 16% to 20% (the 16-20 Group); and

4) Annual load factors of 21% to 25% (the 21-25 Group)

The demand charge for each LF Group would be calculated by dividing the annual revenue produced by each group (as if it were billed using the total demand billing units based on the 80% demand ratchet and the proposed Distribution System Charge applicable to loads with a load factor greater than 25%) by the group's total actual kW for the test year.

Oncor said that the demand charge applicable to each LF Group is designed to be revenue neutral within each group such that customers in one LF Group will not subsidize customers in the other LF Groups, and that customers with an annual load factor greater than 25% will not subsidize those customers with less than a 25% load factor

Upon approval in the rate case, Oncor would review each point of delivery greater than 20 kW receiving service under the Secondary Service Greater than 10 kW rate after the first bill cycle under the new rates, and would notify the REP such that the second bill received under those rates would be billed using the load factor criteria described above.

For example, if the PUCT approved Oncor's proposal as part of a rate case order with rates to be implemented on July 26, 2011, and Point Of Delivery "A" is billed on the new rates on July 26, 2011, Oncor would calculate the annual load factor for Point Of Delivery "A" to determine if billing would remain on a kW basis with the ratchet provision or would be converted to the load factor provision utilizing actual kW billing. If Point Of Delivery "A" has a calculated annual load factor of less than 25%, a notification would be sent to the REP indicating a rate change, and the August 26, 2011 bill would be calculated based on actual kW and the appropriate LF group demand charge for the Distribution Service Charge. All other charges would be billed using the billing units that would otherwise apply if the point of delivery did not qualify for the load factor provision.

Going forward, the LF Group mechanism would be adjusted annually. Oncor would review each point of delivery greater than 20 kW receiving service under the Secondary Service Greater than 10 kW rate after the December billing month of each year and determine the annual load factor for each point of delivery. If the point of delivery qualifies for billing under this load factor provision, a notification would be sent to the REP that the rate would be changed for billing under this provision for the January bill cycle. The billing for that point of delivery would remain under that revised rate until the next annual review.

In other areas of the rate filing of particular interest to REPs, Oncor has proposed adjusted meter-related discretionary service charges (i.e., Standard Discretionary Service Charges SD1, SD2, SD5, SD8 and SD9 and Company Specific Discretionary Service Charges DD10 and DD12) to take into account the advanced meter deployment schedule through June 2011. This adjustment will reduce the average cost of performing these meter-related discretionary service charges since there will be fewer truck rolls required and more orders being completed with the advanced metering system.

Consistent with revisions to Substantive Rule 25.193, Oncor has also proposed that the costs associated with the ERCOT system-wide transmission access fee paid by all Distribution Service Providers, which were previously recovered through the Transmission System Charge, be recovered through the charges implemented under Rider Transmission Cost Recovery Factor (TCRF).

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