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Texas PUC Commissioner Muses Whether TDU Costs Charged to Retail Providers Should Rely More On Fixed, Not Volumetric, Charges

March 25, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Complaints about high bills at Sharyland Utilities, LP implicate how costs are allocated and recovered in distribution rates, and raise questions regarding whether such distribution costs should be recovered on a volumetric or non-volumetric basis, Texas Public Utility Commissioner Kenneth Anderson said during yesterday's open meeting.

Anderson's comments came during a discussion of the opening of a project to examine a significant number of recent complaints of high bills at Sharyland Utilities, LP (click here for prior story).

Anderson said that the discussion concerning high bills at Sharyland, which have been attributed to delivery rates and specifically how costs may have been allocated to certain customer classes in the current rates, "actually gets to a bigger issue: is recovery of distribution charges volumetrically the right way to go, or should, at some point, we rethink that whole issue, and do something more on a fixed rate, by class, recovery charge."

Anderson noted that T&D infrastructure is built to serve peak load, and therefore costs do not change based on customer volumes.

"I don't know which, frankly, would be economically better for the customer," Anderson said, but noted that under volumetric rates, "when you start consuming more, you pay more, not only for energy, but your delivery charge goes up, because it's measured volumetrically."

Any change in how TDU fees are assessed to REPs would assuredly result in changes in how REPs recover such costs from retail customers, and an increase in non-volumetric TDU charges would likely prompt an increase in REPs' flat monthly fees (though, as now with current non-volumetric TDU fees, such as the AMS surcharge, some REPs will no doubt try to differentiate themselves by offering a product with one simple per kWh rate and no additional monthly fees).

The more costs charged by REPs outside of volumetric rates, the less meaningful the current standard usage comparisons in the Electricity Facts Label become, as the customer's usage will have a much larger impact in determining their actual all-in per kWh price, and references to an all-in price at a standard usage, such as 1,000 kWh, will diverge from the customer's actual all-in per kWh rate to a much greater extent.

In 2011, CenterPoint Energy Houston Electric had proposed an alternative cost recovery mechanism under which the monthly residential customer charge would have increased to $18.18 from the then-current level of $1.99. The proposal was rejected by the PUCT

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