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Texas Retail Provider Says PUC Should Increase Energy Market Offer Caps As Alternative To PCM
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Octopus Energy has suggested in comments to the Public Utility Commission of Texas increasing the current energy market offer caps as a mechanism to assure reliability, rather than the Performance Credit Mechanism
"[T]he PCM creates an administrative morass, taking away revenue streams from the existing energy-only market and creating new revenue streams directed to fossil fuel generation while discriminating against specific technology types. It will have these effects in a way that LSEs cannot properly hedge and that inflates wholesale market costs for customers who ultimately pay the bills," Octopus said
"Octopus Energy notes that a much simpler approach that is consistent with Texas’s longstanding history of competitive market design would be to directly reward actual performance, i.e., actual delivery of energy during times of scarcity, rather than rewarding conceptual 'availability' through a capacity market," Octopus said
"All that the Commission needs to do is to adjust the energy market offer caps upward to send a more robust price signal to reflect higher value during scarcity hours. LSEs can hedge these risks and this method is the most economically efficient, simplest, market-based solution, meeting the statutory directive to select competitive over regulatory methods whenever possible," Octopus said
"We recognize that customers demand reliability, but we also recognize that customers also will not have electricity if they cannot afford their bills. The proposed PCM does not guarantee reliability, but it does guarantee that customer prices will go up and more customers will not be able to afford their bills," Octopus said
Octopus further cited concerns from PUC Staff in another proceeding -- concerning REPs' sought ability to issue a one-time adjustment to fixed price contracts due to a new ERCOT ancillary service (ERCOT A/S pass-through proceeding) -- as showing the harm to customers from PCM
As first reported by EnergyChoiceMatters.com, PUC Staff in the ERCOT A/S pass-through proceeding recently said that allowing REPs to adjust previously established fixed rates due to a new A/S would be an, "unfair surprise to consumers."
In opposing a one-time rate adjustment due to a new A/S, Staff cited the PUC's, "clear effort to safeguard consumers from surprising billing amounts associated with consumption that occurred in the past," with PUC Staff warning that, under the REPs' sought relief, "consumers will be negatively impacted by having this charge retroactively appear on their bills for activity that occurred a year ago."
Octopus said that such concerns arise under a PCM which uses an ex post determination of performance credit (PC) hours, stating, "The timing mismatch inherent in the proposed PCM is a major flaw of the PCM model," as Octopus also noted the migration of customers among REPs
Octopus said, "Commission Staff expressed concern about consumers being subject to 'surprising billing amounts associated with consumption that occurred in the past.' Due to the proposed ex post facto determination of PC [performance credit] hours, if a REP is to recover costs from a customer that caused the REP to incur liability for PC-costs, this is exactly the result that would occur."
"In the alternative, in order for those cost-causing customers to avoid 'untimely, surprising bill increases over which consumers have no control', the REP would be forced to assess the costs associated with the PCM against future customers who had no responsibility for prior customers’ consumption. Such a result would not be fair to those customers. Yet, these are the results of the PCM as it has been proposed to date," Octopus said
In separately filed comments, the Texas Energy Association for Marketers (TEAM) said, "[T]here is also a concern that ex-post parameters may be inconsistent with the
requirements of HB 1500 for an implementation of the PCM that is competitively neutral in the
retail market. Ex-post parameters would be incongruous with our competitive retail market where
loads are not static and may not stay with the same load-serving entity."
TEAM also said, "Thus far, ERCOT and E3 have not put forward a proposal that provides a workable
collateral calculation for the PCM. Early estimates of a proposal to require Net-CONE amounts
effectively equate to a $12 billion collateral amount. Factoring a 10% cost of capital for the
collateral, the uplift to the market immediately exceeds the $1 billion cap from the collateral cost
alone, before any other program costs are considered, thereby making the program expensive,
ineffective, and inconsistent with legislative requirement."
"Given competitive retail market, where loads are not captive, a centrally procured
obligation that follows the load appears to be the only manageable design that would create a
competitively neutral collateral requirement per the statutory guideline," TEAM said
"TEAM is concerned that current discussions about the PCM create numerous conflicts with
HB 1500 and Commission orders that may prove fatal to this process. These conflicts undermine
the competitive retail market while likely resulting in more expensive energy for Texans without
corresponding reliability improvements," TEAM said
Project 55000
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Uses PUC Staff's Recently Stated Concerns About Surprises In Bills To Retail Electric Customers, In Opposition To PCM
June 20, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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