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Texas Load Interests Seek Expanded Demand Ratchet Waiver

March 27, 2012

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Copyright 2010-12 Energy Choice Matters

Exemption from the demand ratchet should be expanded from the level currently contained in a Public Utility Commission of Texas proposal for publication, several load interests said in comments to the PUCT (39829).

As first reported by Matters, the proposal provides that a demand ratchet shall not apply to a non-residential secondary voltage service customer that has an annual load factor less than or equal to 25 percent

The Texas Energy Professionals Association asked that the load factor threshold for application of the waiver be increased from the 25% contained in the proposed rule to 35%.

"Many of the intended beneficiaries of this rule, low load factor customers, have load factors that are above 25%," TEPA said.

TEPA noted that data on the load characteristics of a sample of churches provided by Texas Impact revealed that, although the majority of the accounts have load factors of 25% or below, 10% of the accounts have load factors above 25%. In addition, 30% of the energy consumption of these churches is attributable to accounts with load factors above 25%. Similarly, data previously provided by Fox, Smolen & Associates revealed that approximately 40% of their clients' accounts have load factors greater than 25%.

"Extending eligibility for the ratchet waiver to customers with load factors less than or equal to 35% would increase coverage of the sample of church accounts from 70% to 97%. Likewise, increasing the load factor threshold to 35% would increase the coverage for the meters represented in the data provided by Fox Smolen & Associates from 63% to 84%," TEPA said.

TEPA noted that ERCOT has defined low load factor customers as those with load factors below 40%.

TEPA also said that setting the threshold at 35% would benefit the greatest number of customers while minimizing negative impacts on other customers.

The Steering Committee of Cities Served by Oncor agreed that the threshold can be increased to a somewhat higher level without a significant adverse impact on other customers.

Stressing the need for flexibility to respond to each TDU's unique service area, the joint TDUs asked that the rule provide TDUs with flexibility to justify that a different load factor level for the ratchet waiver is just and reasonable.

The TDUs noted that the proposed 25 percent threshold will result in an exemption from the demand ratchet application for nonresidential secondary service customers of 66 percent for AEP Texas Central; 65 percent for AEP Texas North; 54 percent at CenterPoint Energy Houston Electric, and 61 percent at Texas New Mexico Power.

"This variance illustrates why a 'one size fits all' approach is not the optimal strategy and thus shows why the Commission should retain the flexibility to set the exemption level at an appropriate level in a TDU's rate case proceeding," the TDUs said.

TXU Energy, however, said that the ratchet waiver should be uniform across TDUs to reduce unneeded complexities.

The TDUs further said that the Commission should clarify that the demand ratchet waiver provisions do not apply to Transition Charges. "TCC and CEHE have numerous Transition Charges (TCs) approved by Commission financing orders pursuant to specific statutory securitization provisions. Those TCs, calculated pursuant to the financing orders, contain ratcheted charges. In order not to violate those financing orders, the Commission should clarify that the [ratchet waiver] provisions of §25.244 do not apply to TCs," the TDUs said.

TEPA, however, said that the demand ratchet waiver should apply to all ratchet-based charges. "PURA §36.009 clearly states that Transmission & Distribution Utilities (TDUs) are required to 'waive the application of demand ratchet provisions for each nonresidential secondary service customer that has a load factor equal to or below a factor set by commission rule,'" TEPA said.

TEPA listed other charges historically billed on ratcheted demand as including transition charges, nuclear decommissioning charges, and rate case expense surcharges, among others.

TEPA further said that the rule should prohibit multi-tiered load factor-based rate structures, such as Secondary Service Greater Than 10 kW, as TEPA called such rate structures a "ratchet" because the load factor calculation is based on the customer's maximum consumption during the previous calendar year.

The Oncor Cities sought to clarify that the 25% threshold for a ratchet waiver cited in the rule was not meant to require the use of a demand ratchet for all customers with a load factor greater than 25% in situations where certain of such customers are currently subject to a ratchet exemption.

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