Energy Choice
                            

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Texas OPUC: Customers' Ability To Shop "Compromised" Under SFV

August 25, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

"Customers ability to shop and find true differences in the competitive market are compromised under SFV [straight-fixed variable rate design]," and the Public Utility Commission of Texas should decline to adopt or recommend its use, the Office of Public Utility Counsel said in reply comments on a consultant report concerning alternative ratemaking

EnergyChoiceMatters.com was first to report on June 23 that the consultant report singled out an SFV rate design, as it was the only mechanism among several discussed in the consultant's report for which the consultant expressed a "preference."

In our prior story, EnergyChoiceMatters.com noted the innumerable problems SFV poses for the retail market

OPUC agreed with concerns raised by REPs in its reply comments.

Noting comments from the REP Coalition, OPUC noted, from a REP perspective, "SFV would result in a radical change to how REPs price their products and that adoption of SFV would create significant costs to the retail market. Retailers must reflect rate design for transmission and distribution when pricing their products, whether explicitly as a pass-through or implicitly through the design of energy rates and minimum charges which reflect these rates, as well as through decisions to emphasize different sizes and types of customers in their marketing programs. Customers ability to shop and find true differences in the competitive market are compromised under SFV and the Commission should decline to adopt or recommend its use."

The REP Coalition also submitted reply comments requesting the Commission expressly decline to make any recommendations in support of a specific alternative ratemaking methodology for the ERCOT footprint.

The REP Coalition included its comments noting the extensive problems SFV poses for REPs as stated at a public hearing, click here for our story on the REPs' opposition to SFV at such hearing

"The REP Coalition Urges the Commission to expressly decline to recommend any of the alternative ratemaking methodologies surveyed in the Report for the areas of the State open to retail electric competition. The Report does not cite to or rely upon any empirical evidence to suggest that a particular methodology not currently used to set TDU rates and charges 'would improve the efficiency and effectiveness of the oversight of those electric utilities and ensure that electric rates are just and reasonable' compared to the ratemaking mechanisms already in place today. Recent TDU earnings monitoring reports do not indicate a systemic problem with current ratemaking mechanisms or a chronic under-recovery by the TDUs under those mechanisms," the REP Coalition said

"Specifically. the Commission should not endorse the straight fixed-variable ('SFV') rate methodology, which the independent consultant recommends with certain caveats. Christensen premises this conditioned recommendation on the relative merits of three considerations, including 'providing a close match between retail price components and the ways (i.e. fixed or variable) that costs are incurred.' The SFV methodology, however, cannot ensure this close match because the Commission cannot dictate retail pricing structures in the competitive market. More importantly, this methodology would entail a wholesale revision of the manner in which TDU rates and charges are set today, which would have an adverse ripple effect in the competitive retail electric market in both the short- and long-term. It would change the fundamental design of those rates and charges, which in turn would significantly change the manner in which retail electric products are offered and priced in the competitive market," the REP Coalition said

The REP Coalition noted that the EFL is currently formatted to present an average price per kilowatt-hour, which would not appropriately reflect the large demand charges and fixed cost price components resulting from an SFV ratemaking methodology. "Moreover, a predominance of those price components would not be understood by customers conditioned to conserve energy in order to reduce their electric bills," the REP Coalition said

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