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Texas REPs Warn of "Rate Shock" -- from Potential Delay in Sharyland Transition to Competition (But Not Capacity Market?)
Several Texas retail electric providers have warned the Public Utility Commission of Texas that introducing retail choice to Sharyland Utilities' former Cap Rock service areas during the summer -- if a rate case schedule does not permit a May 1, 2014 transition to competition as originally contemplated -- could produce "rate shock" and, "misplaced criticism of retail competition."
In comments filed with the PUCT, the Texas Energy Association for Marketers and TXU Energy noted that the current procedural status of Sharyland Utilities' unbundling delivery rate case (for the Stanton, Colorado City, Brady, and Celeste divisions) indicates that the case may not be concluded such that retail choice could still be introduced on May 1, 2014 while still providing 90 days between the time that final unbundled tariffs are filed and the May 1 start. The REPs noted that the hearing is set for November 18-22, which could push a proposal for decision to January, with, "realistic expectations for a final order sometime in March, with Sharyland filing its tariffs a short period of time thereafter."
If the full 90-day notice period is not altered, a March order would force a delay in the May 1 start of retail choice, potentially into the summer.
"The REP Group is concerned about the potential of having the Transition Date occur in mid to late summer, during the highest consumption months of the year, and during the months where the wholesale price of power is likely to be higher," the REPs said.
"Also relevant to the reasons why a mid-summer implementation is not desirable are the rate amounts for retail delivery service proposed by Sharyland's application. The requested amounts are significantly higher than other utilities in [sic] operating within the competitive areas of the Electric Reliability Council of Texas ('ERCOT'). While the REP Group recognizes these rate levels will be reviewed by the Commission and could be reduced, the REP Group is concerned with the potential for customer rate shock, which may result in customer complaints to REPs and misplaced criticism of retail competition caused by the failure to distinguish costs driven by regulated transmission and distribution utilities from competitive energy prices. This situation would be made worse by a transition to competition in the middle of the summer, where usage levels for customers' bills would be higher than normal," the REPs said.
Though the REPs did provide a comparison between delivery rates at Oncor and proposed rates at Sharyland Utilities, this would appear less relevant in terms of rate shock, insofar as customers are going to be comparing their year-ago, bundled service bills, versus their new retail choice bills (reflecting unbundled energy and delivery). While certainly, Sharyland customers in areas neighboring Oncor service areas may note the lower Oncor bills, rate shock will largely be determined by how much higher (if at all) the Sharyland Utilities unbundled delivery rates are versus the delivery costs embedded in the current bundled rates, as well as any change in energy commodity costs from last year to this summer. The REPs did not provide any comparison between these costs.
Matters is making a note of these REPs' concern with this indeterminate amount of "rate shock" at Sharyland Utilities in evaluating REPs' position on potential solutions to meet the mandated reserve margin to be adopted by the PUCT, with some alternatives for meeting the mandate having the potential to cost in excess of $4 billion annually. Certainly, such new costs could lead to, "misplaced criticism of retail competition" caused by the failure of customers to appreciate that such costs are driven by regulated Commission mandates instead of, "competitive energy prices."
To ensure that the transition to retail competition at Sharyland Utilities does not occur during the summer, the REPs said that their preferred solution is to accept a 60-day notice period for implementation of unbundled rates such that competition can still be introduced on May 1, 2014.
"While 60 days is not ideal, preservation of the May 1, 2014 Transition Date to the extent possible is important to ensure that the first months of competition experienced by customers within the Sharyland territories occur during shoulder months, which are the months that customers typically have lower levels of electricity usage," the REPs said.
However, if it becomes clear that the May 1, 2014 transition date is not possible even under 60-day notice due to further delays in adjudicating the rate case, the REPs said that the Commission should not start retail choice during "mid-summer."
"To avoid a mid-summer transition, the REP Group recommends that, should it become apparent by the conclusion of the November 18-22 hearing that a May 1, 2014 Transition Date is not likely, the parties in this docket convene with Your Honor to develop a process to remand the Transition Date issue to the Commission for disposition," the REPs said.
"Specifically, the REP Group would seek to delay the Transition Date to September 2, 2014," the REPs said.
In separately filed comments, Reliant Energy opposed as premature delaying the transition to competition at this time, since it is unknown whether it is correct that the May 1, 2014 date cannot be achieved. Reliant does support shortening the time period between the filing of final unbundled rates and the start of competition from 90 days to 60 days if it allows a May 1, 2014 transition to competition.
"If, however, a 60 day period is not possible, Reliant prefers to keep the existing 90 day period between tariff filing and the beginning of competition versus a fixed start date for competition in September or later," Reliant said.
"Competition starting during the summer can be managed despite high usage. While customers might see an increase in their electric bills, September usage also tends to be quite high, minimizing the value of waiting to begin competition until September 1st," Reliant said.
Also of note, Reliant said that, "methods to temper any potential large rate impact, such as phase in plans, are available, making it unnecessary to avoid a summer start date, should May 1st prove unattainable."
Reliant did not expand upon what these potential "phase in plans" would be, and whether they would be a regulated solution (applied to delivery rates or all-in rates), or something offered by REPs voluntarily.
Docket 41474
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Reporting by Paul Ring • ring@energychoicematters.com
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