Texas ALJs Recommend Rejecting CenterPoint Alternative Customer Charge Proposal

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December 6, 2010

Two Texas ALJs have recommended that the PUCT deny CenterPoint Energy's alternative cost recovery mechanism which would have significantly raised the fixed customer charge for residential customers.  The proposal was an alternative to CenterPoint’s original request for a Distribution Cost Recovery Factor (DCRF).  Consideration of a DCRF was later struck from the rate case.

As only noted in Matters, CenterPoint proposed in its base rate filing an alternative cost recovery mechanism under which the monthly residential customer charge would increase to $18.18 from the current level of $1.99 (Only in Matters, 7/1/10).

"Although CenterPoint makes strong arguments in favor of its proposed alternative rate design, the ALJs are concerned that if adopted, the rate design would be contrary to Commission precedent.  As a consequence, the ALJs recommend that the Commission reject CenterPoint's proposed alternative customer charge," the ALJs said in a proposed order in CenterPoint's rate case (38339).

The ALJs endorsed Staff's recommendation regarding costs for disconnections and reconnections.  Retail electric providers had asked that such charges be set at zero for customers with advanced meters, similar to the process at Oncor, because the charges act as a barrier to prepaid products.  In response to the REPs' petition, CenterPoint suggested setting all discretionary service charges to zero now, rather than only disconnect and reconnection charges.

However, Staff recommended zeroing-out only the discretionary service charges for disconnection and reconnection, with no corresponding reduction to test-year expenses.  Furthermore, Staff said that the $0 disconnection and reconnection charge should apply regardless of whether the customer has an advanced meter.

Staff explained that limiting the zeroing-out of discretionary service charges to disconnection and reconnection (without a corresponding reduction to test-year expenses) limited the reduction in miscellaneous revenues available to offset base rate costs, compared to zeroing-out all of the meter-related discretionary service charges at this time.  In addition, it fairly balances the meter-related discretionary service charges in the test year with the reduction of meter-related discretionary service revenues that will occur after rates are set in the instant case.

The ALJs would approve Staff's recommendation to set the disconnect and reconnect discretionary service charges for all customers to zero, while not zeroing-out any other charges.

Regarding demand ratchets, the ALJs recommended that the Commission exempt from the demand ratchet customers with demand less than or equal to 20 kVA.

The ALJs would deny CenterPoint's proposed adjustment to residential class billing determinants based on the projected attainment of energy efficiency targets.  CenterPoint had sought a 62,165,700 kWh adjustment to its residential class load-related billing determinant based on CenterPoint reaching its projected energy efficiency goals.  The adjustment is designed to recover CenterPoint's revenue requirement despite the expected reduction in throughput.

Staff opposed the adjustment, arguing that the projected reductions are not known and measurable adjustments which qualify for an adjustment to the test year data, and further called the adjustment a back door attempt to implement a lost revenue recovery mechanism, which has thus far been rejected by the Commission.

The ALJs agreed with Staff and recommended that CenterPoint's request to adjust its residential class billing determinants based on CenterPoint's projected energy efficiency goals be denied.

The ALJs also recommended that the Commission deny CenterPoint's proposed storm hardening cost recovery rider (Rider SH), calling Rider SH implementation "premature."

"It appears to the ALJs that the more appropriate time for CenterPoint to address storm hardening measures and related costs and means for cost recovery is after CenterPoint: has submitted a storm hardening plan; the plan has been evaluated; specific storm hardening initiatives have been identified; related costs have been determined; and the most appropriate means for cost recovery has been established considering all relevant factors.  Additional concerns regarding the: (1) potential for double recovery of costs; (2) failure to account for offsetting revenues; and (3) improper cost allocation, further support the ALJs' recommendation that CenterPoint's proposed Rider SH be denied," the ALJs said.

The ALJs recommended that the Commission deny CenterPoint's petition to adjust the four coincident peak (4CP) transmission cost allocation methodology based on weather and the number of customers at year-end.  The ALJs further recommended that CenterPoint should not be allowed to allocate transmission costs using hourly demands rather than the 15-minute demands used by ERCOT.

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