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Texas ALJ's Proposed Order Would Deny Retail Providers' Sought Declaration Which Would Allow One-Time Adjustment To Subset Of Fixed Rate Contracts To Account For New Ancillary Service
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Retail electric providers in Texas would not be permitted to make a one-time adjustment to certain existing fixed rate contracts to reflect the costs of ERCOT Contingency Reserve Service (ECRS), as a proposed order from the Texas PUC's Chief ALJ would deny a petition from the REP Coalition to designate ECRS as an ancillary service product under which REPs incur charges, "beyond the REP’s control for a customer’s existing contract."
See background on the REPs' petition here
Under the PUC's fixed rate rule, ancillary services are defined as being included in the fixed rate. However, REPs may seek from the PUC a determination that a new A/S product imposes costs that are beyond the REP's control, with such determination then allowing the price charged by a REP to "vary" from the previously disclosed fixed rate in light of the new A/S product, only for those contracts entered into prior to the new A/S product
In their petition for such a finding from the PUC, REPs envision the determination as allowing a one-time adjustment to an eligible customer's fixed rate going forward, though the rule is generally silent as to how the fixed rate may "vary" from the previously disclosed rate
The ALJ issued a proposed order that would decline to designate ECRS as an ancillary service product imposing costs on REPs that are beyond a REP’s control
Citing the PUC's obligation to protect customers, the proposed order would find that REPs were better positioned to address future ECRS costs, at the time of customer contracting, than residential and small commercial customers
While the proposed order concedes that, "In some instances, these costs may be difficult for REPs to accurately predict," the proposed order concludes, "Nevertheless, there is no question that REPs have a significantly greater ability to do so than their residential and small commercial customers."
The proposed order would find that, because REPs had, or should have had, awareness of potential ECRS costs, these costs were not "entirely" beyond a REP's control.
The proposed order notes that the original ECRS NPRR was proposed in February 2019
Furthermore, the draft order cites discussion at a December 2021 PUC open meeting (story here) in which Commissioners adopted the relevant revisions to the fixed price rule, and in which Commissioners voiced concerns about any ability for REPs to adjust fixed prices due to new ancillary services, even in granting the right for such a petition to be made
The ALJ's proposed order specifically cites a statement from then-PUC Chair Peter Lake, who had said, "when we do get ECRS, how can we ensure that those costs, those new ancillary services are not passed on to consumers?"
"These factors should have prompted REPs, prior to June 2023 [the ECRS start date], to price fixed rate products to take into account the possible costs of ECRS," the draft order states
REPs have argued that key parameters for ECRS were not finalized until April 2023
The proposed order says that the rule's relevant provision allowing a fixed rate to "vary" from the previously disclosed rate is intended for "extraordinary or unexpected costs" from a new A/S
The proposed order further says that REPs' pleas are undercut by the timing of such request for the A/S designation
The ALJ noted that the request was made several months after ECRS took effect. Such delay, the ALJ said, deprived customers of the ability to adjust their usage in response to potential new costs under the A/S which customers may later be assigned related to such prior service
The proposed order notes that ECRS took effect in June 2023, while the instant REP petition was filed in February 2024 (ECM notes that the REPs had filed the substantively same petition in November 2023, as part of another docket on wholesale market issues, and not as a stand-alone petition as was subsequently filed).
The ALJ said that the PUC's rule "envisions" that any designation finding that new A/S costs are beyond a REP's control should occur before the new A/S becomes effective
"Obtaining the designation before the implementation of a new ancillary service charge has the benefit of safeguarding customers from being retroactively billed for ancillary service charges for consumption that occurred in the past," the proposed order states. (ECM note: The rule does not specify the form any adjustment to the fixed rate will take. It does not, for example, require REPs to "retroactively" assign A/S costs to specific prior customer usage or prohibit alternative mechanisms; it merely allows an adjustment to the fixed rate to occur)
Ultimately, the ALJ's proposed order finds that, "The REP Coalition failed to prove that the need for consumer protection is outweighed by the need to protect REPs from risk of reduced profitability due to ECRS costs."
Docket 55959
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September 4, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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