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Stakeholders Urge PUCT to Defer Consideration of ERCOT Admin. Fee

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October 5, 2010

Several stakeholders urged the PUCT not to adjust the design of the ERCOT System Administration Fee (SAF) ahead of potential action by the legislature in the 2011 session in response to the Sunset Commission report, while TXU Energy said that the current mechanism for charging the fee appropriately provides REPs with rate certainty.

In its rulemaking addressing oversight over ERCOT (Project 38338), the Commission had asked whether it is appropriate to adopt the Sunset Commission's recommendation of altering the fixed per kilowatt-hour ERCOT admin fee such that it would vary over the year to reflect necessary adjustments required to produce the required revenue (due to actual kilowatt-hour sales departing from the estimate used to set the fee).

Texas Competitive Power Advocates, ERCOT, and CPS Energy all separately said, to varying degrees, that adjudication of the issue by the Commission is premature in light of potential legislative direction next year.

ERCOT further noted that, "the SAF fee structure has been the subject to spirited debate in recent years among the stakeholders who pay it.  While the debate has centered on the allocation of the SAF between load and generation, the allocation issue is sufficiently entangled with the overall rate design that it is difficult to resolve one without considering the other."

ERCOT suggested that it may be most productive to open a new project to discuss the fee's structure and other issues in mid-2011, after the legislative session concludes ERCOT's Sunset review, but before ERCOT would need to file a post-2011 admin fee case.

TXU Energy said that it supports the current method for collecting the ERCOT administrative fee, noting that because the fee is allocated based on load share, REPs (or other LSEs) bear the cost of the fee.  "In a competitive marketplace, a retailer must forecast its costs to serve customers in order to appropriately set the prices for its products.  Consequently, it is important that REPs have certainty to the extent possible in the forecast of their costs, which include the ERCOT administrative fee," TXU said.

"The current methodology for setting the ERCOT administrative fee provides a measure of cost certainty REPs require to properly set pricing for their products.  Many pricing plans span from multiple months up to a year or more.  If the administrative fee is restructured to change throughout the year, REPs will bear a significant amount of risk because of the uncertainty of the fee.  This additional risk will likely need to be factored into the prices offered to customers," TXU added.

CPS Energy agreed that making the ERCOT fee vary throughout the year, "will make ratemaking potentially more difficult for all market participants."

Texas Industrial Energy Consumers suggested that the goal of the Commission -- preventing ERCOT from over- or under-recovering revenue due to the current flat fee -- may be addressed by a means other than simply changing the per kilowatt-hour fee during the year, by collecting the fee on some basis other than energy usage.

"If it turns out that many of ERCOT's costs are incurred on a per customer or per transaction basis, the fee should be designed to track that cost causation.  Such a fee would likely be more predictable for ERCOT and better track how ERCOT's costs are incurred," TIEC said.

   
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