Texas PUC Staff Strawman Would Change Definition Of Fixed Rate To Include Ancillary Service Charges

New "Signed" Acknowledgement Of Risk Proposed For Products Beyond Those Required By Recent Legislation

Staff Seeks Comments On Changes To POLR Pricing

June 24, 2021

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Staff of the Texas PUC have filed a strawman containing proposed rule changes to implement HB 16, which generally bans wholesale energy market index plans to mass market customers, and relevant portions of SB 3. The strawman also includes new customer protection changes not mandated by statute.

As first reported by EnergyChoiceMatters.com, several of the strawman proposals had been previewed by Staff at a recent open meeting

The strawman would explicitly add ancillary service charges to the costs that must not vary under a fixed rate product

Specifically, the strawman would define fixed rate product to mean, "A retail electric product with a term of at least three months for which the price (including recurring charges and ancillary service charges) for each billing period of the contract term is the same throughout the contract term, except that the price may vary from the disclosed amount solely to reflect actual changes in the Transmission and Distribution Utility (TDU) charges, changes to the Electric Reliability Council of Texas (ERCOT) or Texas Regional Entity administrative fees charged to loads or changes resulting from federal, state or local laws that impose new or modified fees or costs on a REP that are beyond the REP’s control."

The strawman would also add ancillary services as a component under the definition of "price" which would now be defined as, "The cost for a retail electric product that includes all recurring charges, including ancillary services, excluding state and local sales taxes, and reimbursement for the state miscellaneous gross receipts tax."

The strawman notes that certain provisions of §25.475 (general disclosure requirements, which include the fixed rate definition and most of the provisions discussed below) will apply to "large commercial and industrial customers" where specifically noted, and that such large customers will not be able to waive these specific customer protections (as they may generally do for most provisions). However, as drafted, the strawman (which is intended to generate discussion) appears to limit the §25.475 provisions which are applicable to large commercial and industrial customers to provisions related to newly required risk disclosures for all indexed and ancillary pass-through products (discussed further below), though the term "customer other than a residential or small commercial customer" is used here, rather than "large commercial and industrial customers".

The strawman would require a new Acknowledgement of Risk (AOR) to be "signed" by the customer for all indexed products (not just Wholesale Indexed Products as required by statute), and also for any product for which ancillary service costs are a pass-through

Consistent with statute, the strawman provides that a REP, aggregator, or broker must not offer a wholesale indexed product to a residential or small commercial customer. A REP, aggregator, or broker may enroll a customer other than a residential or small commercial customer in a wholesale indexed product only if the REP, aggregator, or broker obtains before the customer’s enrollment an AOR.

Going beyond the statutory requirement, the strawman provides that a REP, aggregator, or broker may enroll a customer, including a customer other than a residential or small commercial customer, in an indexed product or a product that contains a direct pass-through of ancillary service charges only if the REP, aggregator, or broker obtains before the customer’s enrollment an AOR.

Specifically, the strawman provides that before a customer’s enrollment in an indexed product, a wholesale indexed product, or a product that contains a direct pass-through of ancillary service charges, an aggregator, broker, or retail electric provider must obtain an Acknowledgement of Risk (AOR), "signed by the customer, verifying that the customer accepts the potential price risks associated with the product," as further proposed below:

• For Indexed Products other than Wholesale Indexed Products the AOR must include the following statement in clear, boldfaced text: "I understand that the volatility and fluctuation of indexed pricing based on non-fixed indices may cause my energy bill to be multiple times higher in certain billing periods. I understand that I will be responsible for charges caused by fluctuations in the non-fixed indices and the resulting indexed price."

• For products that contain a direct pass-through of ancillary service charges the AOR must include the following statement in clear, boldfaced text: "I understand that my energy bill may include a direct pass-through of ancillary service charges, which may cause by bill to be multiple times higher in billing periods in which ancillary services charges are high. I understand that I will be responsible for charges caused by fluctuations in ancillary service charges."

• For Wholesale Indexed Products the AOR must include the following statement in clear, boldfaced text: "I understand that the volatility and fluctuation of wholesale energy pricing may cause my energy bill to be multiple times higher in a month in which wholesale energy prices are high. I understand that I will be responsible for charges caused by fluctuations in wholesale energy prices." Wholesale Indexed Product is defined as, "A retail electric product in which the price a customer pays for electricity includes a direct pass-through of real-time settlement point prices determined by the independent organization certified under the Public Utility Regulatory Act (PURA) §39.151 for the ERCOT power region."

The strawman would also implement new contract renewal procedures and also requirements for a "default" renewal product if the customer does not take action at the time of renewal

For all products, the strawman provides that, "Each contract for service must include the terms of the default renewal product that the customer will be automatically enrolled in if the customer does not select another retail electric product before the expiration of the contract term after the customer has received expiration notice."

The strawman provides, "If a customer takes no action in response to a notice of contract expiration for the continued receipt of retail electric service upon the contract’s expiration, the REP must serve the customer pursuant to a default renewal product that is a month-to-month product that the customer may cancel at any time without a fee. The month-to-month product price may vary between billing cycles based on clear terms designed to be easily understood by the average customer."

As contained in the strawman, the following provision would apply to all products (as it is contained in a section under general requirements; this provision is also essentially duplicated specifically under the fixed rate section of the rules as noted below), though the provision references the existing term of a fixed rate product: "If a REP does not provide notice of the expiration of the contract and the customer does not select another REP before expiration of the contract term, the REP must continue to serve the customer under the pricing terms of the fixed rate product until the provider provides expiration notice or the customer selects another retail electric product."

The strawman includes the following provisions applicable only to fixed rate products:

• For fixed rate products, the REP must provide the customer with at least three written notices of the date the fixed rate product will expire. The notices must be provided during the last third of the contract period and in intervals that allow for, as practicable, even distribution of the notices throughout the last third of the contract period. For contracts for a period:

--- Of more than four months, the final notice must be provided at least 30 days before the date the contract will expire.

--- Of less than four months, the final notice must be provided at least 15 days before the date the contract will expire.

• If a REP does not provide the required notice of the expiration of a customer’s contract and the customer does not select another retail electric product before expiration of the contract term, the REP must continue serving the customer under the terms of the fixed rate contract until sufficient expiration notice is provided and the customer selects another retail electric product.

The strawman would retain the rule's existing timeline for renewal notices for non-fixed rate products

Through the strawman, PUC also requested comment on the interaction of the statutory ban on the provision of wholesale indexed products to small customers, defined as a direct pass-through of real-time settlement point prices determined by ERCOT, and the existing POLR pricing rules. Under 16 TAC §25.43, one component of the rate that Provider of Last Resort (POLR) providers are allowed to charge is the Real-Time Settlement Point Price (RTSPP) for the customer’s load. As previously reported (see story here), at the June 17th Commission work session, the Commissioners expressed an interest in removing the RTSPP from the POLR rate formulas.

With respect to this issue, Commission Staff requested comments on the following questions:

1. If the Commission removes the RTSPP from the POLR rate formulas, what would be an equitable approach to POLR pricing moving forward?

2. What other considerations should the Commission take into account in determining whether and how to remove RTSPP from the POLR rate formulas (e.g. the role the POLR rate plays in §25.498, related to prepaid service, etc.)?

The strawman would also implement REPs' new obligation to provide to customers information the REP has received from the transmission and distribution utility (TDU) pursuant to PURA §17.003(e) regarding the TDU’s procedures for implementing involuntary load shedding initiated by the independent organization certified under PURA §39.151 for the ERCOT power region, and, if applicable, where any additional details regarding those procedures or relevant updates may be located.

Specifically, the strawman would require the following information to be provided along with the customer’s bill in April and October of each year, or as otherwise directed by the commission:

(A) The electric utility’s procedures for implementing involuntary load shedding initiated by the independent organization certified for the ERCOT power region under PURA §39.151;

(B) The types of customers who may be considered critical care residential customers, critical load industrial customers, or critical load according to commission rules adopted under PURA §38.076;

(C) The procedure for a customer to apply to be considered a critical care customer, a critical load industrial customer, or critical load according to commission rules adopted under PURA §38.076; and

(D) Reducing electricity use at times when involuntary load shedding events may be implemented.

This load shed information would also be required to be included in the YRAC document

The YRAC is proposed to also not provide information on, "Special policies or programs available to residential customers designated as chronic condition or critical care under §25.497 of this title and the procedure for a customer to apply to be considered for such designations." (this is a refinement of a similar current obligation)

Project 51830

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