Texas PUC Staff: SWEPCO's Retail Choice Pilot Project Remains "Open"; But Active Participation Only Appropriate As Part Of Staged Evaluation Of Transition To Competition

November 9, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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Staff of the Public Utility Commission of Texas said in a brief today that while a 20-year old electric choice pilot program at the Southwestern Electric Power Company (SWEPCO) remains "open," active participation by customers in the program is only appropriate under statute if the Commission finds that the pilot would constitute the first stage of a transition to competition at SWEPCO, or that other related statutory requirements have already been met

As exclusively first reported by EnergyChoiceMatters.com, East Texas Salt Water Disposal Company (ETSWD) has filed with the Public Utility Commission of Texas a petition for declaratory order and request for the opening of a pilot retail electric choice implementation project at Southwestern Electric Power Company (SWEPCO), or a finding that an existing pilot and tariff is still open to customers.

SWEPCO has opposed the petition, stating that a pilot may only be conducted as part of a larger transition to competition process, and that the PUC and legislature have found that its applicable power region is not ready for retail competition.

In a brief, PUC Staff, "asserts that SWEPCO's initial pilot project remains open, and that the pilot project tariff (pilot tariff) previously approved by the Commission has not been formally set aside or suspended."

"However, Staff declines to recommend the Commission issue a declaratory order requiring active customer participation in the pilot project at this time, as discussed below," Staff said

Staff noted that, with respect to the previously adopted pilot, when adopting rules to pause the transition to competition at SWEPCO in 2006, "The new Section 25.422 did not designate an end-date for participation in the pilot project, and instead specified generally that, notwithstanding 16 TAC § 25.422(e), the pilot projects 'shall continue.'"

"Staff notes that the Commission has repeatedly entertained that SWEPCO's retail customer choice pilot project 'continues' (i.e. remains open) despite lack of customer participation for prolonged periods of time," Staff said

The pilot, therefore, has no end date, Staff said

Staff next addressed PURA § 39.503, which governs any transition to competition at SWEPCO

Staff said that PURA § 39.503 does not preclude a retail customer choice pilot project within SWEPCO, nor did its implementation definitively close the initial pilot project. At a high level, PURA § 39.503 is part of Subchapter K, which generally found that SWEPCO was not ready for retail competition at the time of its passage (2009), and set forth a multi-stage process for any transition to competition

Staff noted that, "SWEPCO's response to ETSWD's petition suggests that the initial pilot project implemented in Project No. 23076 was superseded by Subchapter K in 2009. Specifically, SWEPCO contends that, with limited exception, PURA § 39.502(b) 'makes the rest of Chapter 39 inapplicable to SWEPCO.' Staff disagrees."

Staff said, "Firstly, PURA § 39.502(b) states that '[u]ntil the date on which an electric utility subject to this subchapter implements customer choice, the provisions of this chapter, other than this subchapter and Sections 39.904 and 39.905, do not apply to that utility.' (emphasis added). Section 39.503, which outlines the stages for transition to retail competition, including participation in a retail customer choice pilot project under § 39.503(c)(1), is included in Subchapter K. Therefore, PURA § 39.503 is applicable to SWEPCO in the context of determining readiness for a transition to retail customer choice."

"Secondly, Because [sic] PURA § 39.503(a) allows the Commission to modify the sequence of the stages, there is no indication that a pilot project cannot constitute the first stage; however, the permissive language of PURA § 39.503(a) suggests that modification of the sequence of stages is a decision that requires a Commission determination. Staff has not identified any docket wherein the Commission has affirmatively made such a determination since the implementation of Subchapter K," Staff said

"Accordingly, Staff contends that while the passage of PURA Subchapter K did not 'close' or 'cancel' the initial pilot project, it did effectively suspend active participation by retail customers until the first stage of transition to competition was completed under PURA § 39.503(b) or until the Commission determined that participation in the pilot project could serve as an appropriate first stage of transition to retail competition as allowed by PURA § 39.503(a)," Staff said

Addressing the previously adopted pilot tariff, Staff said that the pilot project tariff has not been officially suspended or set aside by Commission order, "but its use has effectively been suspended by virtue of PURA Subchapter k, pending requisite conditions."

Staff noted that, "ETSWD argues in its petition that the initial pilot tariff remains in effect and should be available for use in accordance with the filed rate doctrine. Staff agrees that the pilot tariff has not been formally suspended or set aside; however, Staff recommends denial of ETSWD's request for issuance of a declaratory order requiring SWEPCO to apply the pilot tariff rates to ETSWD at this time."

"The Commission approved a retail customer choice pilot tariff for the SWEPCO service area on May 31, 2001, and later approved an amended pilot tariff for SWEPCO on January 16, 2002. Staff has reviewed the various rate cases filed by SWEPCO since the passage of SB 547 in 2009 and has found no evidence that SWEPCO ever attempted to revise, suspend, or set aside the pilot tariff,43 nor has Staff identified any Commission orders suspending or setting aside the pilot tariff in other dockets," Staff said

"However, Staff recommends that the pilot tariff rates should not be charged until the first stage of transition to retail competition is concluded under PURA Subchapter K, or until the Commission determines that a pilot project will constitute the first stage instead. Staff notes that it has not identified any projects contemplating SWEPCO's readiness for a transition to retail competition since those initiated prior to the 2009 legislative update," Staff said

"Additionally, given the passage of time and inevitable changes that have taken place within SWEPCO's service territory since the pilot tariff was approved, Staff questions the suggestion that pilot tariff rates approved nearly 20 years ago be charged absent the Commission revisiting the reasonableness of those rates in the current setting -- an exercise that no party has requested in the current proceeding," Staff said

Staff further said that SWEPCO's retail customer choice pilot project may not exist as a stand-alone program absent consideration of a full transition to retail competition

"SWEPCO's response to ETSWD's petition suggests that, to the extent ETSWD is requesting participation in a 'stand alone' pilot project absent evaluating SWEPCO's readiness for retail customer choice, this request should be denied. Staff agrees with SWEPCO in that any request for participation in a retail customer pilot project as a 'stand alone' program should be denied," Staff said

"[T]he initial SWEPCO pilot project demonstrates that the pilot project was implemented to assist the Commission in determining SWEPCO's readiness for transition to full retail customer choice -- there is no indication that the pilot project was ever intended to exist as a stand-alone program absent such an evaluation," Staff said

"The most recent determination that SWEPCO is not ready for transition to retail customer choice was made by the Legislature in 2009 -- more than a decade ago. Staff recommends that ETSWD may be allowed to actively participate in a retail customer choice pilot project as contemplated by PURA § 39.503(a) if the Commission so decides, but not without a renewed evaluation of SWEPCO's potential readiness for transition to retail customer choice. Such a discussion could be the subject of a new Project if ordered by the Commission or if requested by an interested party, but should not be the subject of a request for declaratory order," Staff said

"A new project on the issue of SWEPCO's readiness for transition to retail competition could ... address the reasonableness of SWEPCO's initial pilot tariff, should the Commission determine that active participation in a retail customer pilot project is now appropriate," Staff said

Staff noted that the initial pilot project within SWEPCO's service territory failed to encourage a transition to retail customer choice due to lack of participation by retail customers and REPs alike. "Staff notes that in the present proceeding, the intervention of TIEC and ARM, as well as the letter of support filed by TAEP indicate that active participation in a pilot project may be more likely today than it was previously," Staff said

In conclusion, Staff said, "After an analysis of the issues, Staff recommends that the Commission grant in part and deny in part ETSWD's request for a declaratory order in this matter. Specifically, Staff recommends that the Commission issue a declaratory order finding that PURA Subchapter K does not preclude participation in the retail customer choice pilot project initiated under PURA § 39.104(a) in Project No. 23076, and finding that the pilot tariff approved in Tariff Control No. 23924 has not been suspended or set aside by Commission order."

"However, Staff recommends that the declaratory order include a finding that active participation by customers in the pilot project requires a Commission determination that either (1) the requirements of PURA § 39.503(b) have been fulfilled, or (2) the pilot project will constitute the first stage of transition to retail competition for SWEPCO under PURA § 39.503(a) and (c). Staff recommends that ETSWD's request for an order requiring SWEPCO to begin charging ETSWD in accordance with the pilot tariff be denied, absent one of the above conditions being met," Staff said

Docket 51257

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