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Texas OPUC Favors Allowing Advance Pay Products for Existing Customers Until Smart Meters Installed

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December 14, 2010

The Texas Office of Public Utility Counsel has endorsed a mechanism that would allow current customers of financial prepaid, or advance pay, products to continue receiving this type of prepaid service despite proposed new rules which would require that all prepaid service in Texas be conducted through a customer prepayment device or system.

As first reported in Matters, a proposal for publication would amend Subst. R. 25.498 to eliminate the ability of REPs to offer prepaid service using estimated usage, and would require the use of a customer prepayment device or system (10/11). Several REPs offering advance pay service have requested the ability to continue offering advance pay service for those customers without provisioned advanced meters, since otherwise the customers may not be able to take prepaid service (12/7).

In reply comments, OPUC backed allowing current advance pay customers to maintain such service pending installation of a smart meter. OPUC recommended that the prohibition on advance pay products be tied to the customer's receipt of a provisioned advanced meter, or other prepayment device, and that, until such time, existing customers executing a signed waiver or other acknowledgement be allowed to continue to take advance pay products which rely on estimated usage.

Under OPUC's recommendation, current advance pay customers would sign a waiver acknowledging their recognition of the fact that they do not have a customer prepayment device or system, that they are satisfied with their current advance pay product, and that they wish to continue with the advance pay product until such time as their REP (or TDU, in the case of advanced meters) is able to provide a customer prepayment device or system.

OPUC suggested allowing current advance pay customers to continue such service due to concerns that such customers would otherwise be required to transition to a post-pay product, and that customers may not be able to afford the required deposit or other fees for post-pay service.

The Alliance for Retail Markets, the Direct Energy companies, and First Choice Power (collectively, ARM) remain opposed to any continued offering of advance pay products after the rule's effective date (after a short transition), citing the concerns raised by Staff. ARM said that advance pay customers will actually benefit if they transition to post-pay service, quoting the Commission' s statement in the proposal for publication that, "customer complaints made to the commission suggest that there may be considerable abuse of this discretion [in estimating consumption for purposes of non-CPDS prepaid service billing]."

If the Commission decides to allow advance pay service to continue, however, ARM said that such continued service should be limited to existing advance pay customers.

"Allowing REPs to offer non-CPDS prepaid service to new customers despite the planned obsolescence of the service would only exacerbate the problems the proposed rule attempts to rectify," ARM said. ARM further suggested quarterly reporting requirements to monitor the status of advance pay service.

Additional Fees
OPUC, after reviewing the initial comments, now believes that because REPs will receive prepayment for service prior to the provision of service, no additional fees are appropriate under prepaid service. OPUC cited the potential for REPs to "nickel-and-dime" customers at every opportunity through various transaction and maintenance fees.

ARM responded that accepting and processing customer payments in a timely manner is a, "critical component of prepaid service."

"The ability to make more frequent and smaller payments benefits customers of prepaid service because it helps them avoid accruing large obligations. However, the REP incurs a fee, typically to a third-party vendor, for these payments. In most cases, the REP is simply passing through its cost by charging a payment fee to the customer," ARM noted.

ARM said that the rulemaking is not the proper venue to address other fees, applicable to both prepaid and post-pay service. The Texas Legal Service Center had proposed limiting several such fees in initial its comments.

"PURA §39.001(c) precludes the Commission from issuing orders regulating the competitive pricing of retail electric service by REPs, except as authorized by statute ... [P]ayment processing fees involve the pricing of competitive retail electric service. As such, the fees for these services should be established by competitive rather than regulatory forces to the extent they do not conflict with the Texas Finance Code, which prohibits REPs from passing certain charges related to credit cards to customers," ARM said.

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