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Texas Staff: Sharyland's Proposed Place Of Worship Discount Represents Drastic Departure From Competitive Market

Staff Proposes Alternative, Non-Discriminatory Relief For Off-Peak Customers

March 8, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Staff of the Public Utility Commission of Texas, in testimony in Sharyland Utilities' rate case, said that a proposed discount, via an alternative rate design, for places of worship, "represents a drastic departure from the competitive market paradigm," and would be discriminatory, as Staff proposed an alternative mechanism

In its rate case, Sharyland proposed a new optional rate class for churches and places of religious worship which is an energy-based rate, to address concerns with churches that were placed onto the Secondary Greater Than 10 kW rate class which includes a demand charge

Staff's witness said that while Sharyland's attempt to reduce charges for off-peak users such as churches is, "meritorious in its spirit," Staff's witness said that Sharyland's proposal, "should be rejected based on the serious problems associated with the details of Sharyland's proposal"

"I agree with Sharyland that a revision to rate design is warranted to reflect the lower costs of serving off-peak customers. However, the specific details of Sharyland's proposed optional houses-of-worship rate ('church rate') present many serious problems," Staff's witness testified

"Sharyland's particular proposal to address this issue is unprecedented, incompatible with the competitive market, discriminatory, conflicts with cost causation, does not appropriately target off-peak use, and should be rejected. Rate relief for churches and for all off-peak customers such as ballparks and meeting halls should be provided for by revisions to the Transmission Cost Recovery Factor rule, or alternatively by a standalone proceeding for a good cause exception to that rule for Sharyland. Such revisions should include the charging of retail transmission costs based only on a customer's load and usage that occurs within a narrow on-peak window in the summer months," Staff's witness testified.

"Sharyland's proposal is unprecedented, runs the risk of being unreasonably preferential and discriminatory, conflicts with the Commission's determination of a standard rate design for the competitive market, is contrary to cost causation, produces the illogical outcome where a customer with higher load would pay less than a customer with lower load, would increase costs to ratepayers, and is inconsistent with the policies underlying the deployment of advanced metering throughout the ERCOT region. Furthermore, there is a significantly superior rate design alternative that would provide relief to off-peak users such as churches and would avoid the problems associated with Sharyland's proposal," Staff's witness testified.

Staff's witness explained that Sharyland's proposal, "would allow for two customers in the same rate class who have the exact same electric utility usage characteristics to be charged significantly different charges, based solely on the fact that one customer qualifies as a house of worship and one does not." Staff's witness provided an example of a customer with monthly electric usage of 40 kW and 780 kWh. At Sharyland's proposed rates, a non-church customer would pay approximately $400, while a church customer would pay approximately $30. "As this example demonstrates, with a non-church customer paying in excess of 1,200% more than a church customer with the exact same usage, Sharyland's proposal is unduly discriminatory," Staff's witness said

"Sharyland's proposal would result in a distribution rate for churches in the Secondary > 10 kW rate class that is lower than the rate for churches in the Secondary ≤ 10 kW rate class. This leads to the illogical result where a church that uses more power, and causes more distribution costs to be incurred, would pay a lower distribution charge than a church with the same kWh usage, but much lower demand. Consider the hypothetical situation wherein there are two churches, each with 1000 kWh of energy usage in a month during off-peak times, but where Church A uses 40 kW of power and is in the Secondary > 10 kW rate class, while Church B uses 8 kW of power and is in the Secondary ≤ 10 kW rate class. Church A, despite imposing five times the load on the secondary distribution system would pay $37.39 in distribution service charges, compared to Church B paying $48.62," Staff's witness testified

Staff's witness noted the Commission's prior finding in unbundling delivery rates for the competitive market that, "a uniform rate design was appropriate for the purposes of standardizing transmission and distribution rates in Texas."

"[U]uniform transmission and distribution rates help to ensure a more vibrant competitive electric market because the uniformity will facilitate entry by new competitors. The Commission finds that such a generic rate design is appropriate, and therefore, shall be adopted by transmission and distribution utilities," the Commission had noted in the prior unbundling case

In the same unbundling case, the Commission held that, "With respect to a facilities/delivery charge, the Commission finds that the NCP billing determinant [kW demand] should be used for non-IDR metered customers."

"Sharyland's proposed base rate treatment for churches represents a drastic departure from the competitive market paradigm established by the Commission in that it would require the TDU to look into, determine, and police the nature of a customer's end-use of electric delivery service to properly monitor a customer's potential qualification for what could be an extremely preferential rate option," Staff's witness testified

"In the competitive market paradigm established by the Commission for the ERCOT region, the immediate customers of TDUs such as Sharyland are the Retail Electric Providers (REPs) who provide retail service, not the ultimate end-use customers. As part of the unbundling and transition to a competitive market, the retail customer-facing functions of the vertically-integrated utilities would accrue to the REPs, and the TDUs were to have limited contact with the ultimate end-use customers. In order to properly enforce eligibility for the church rate, Sharyland would have to implement systems and incur expenses that otherwise would not be incurred for normal TDU operations, including visual inspections and customer consultations. These costs would ultimately be borne by ratepayers in the form of higher rates," Staff's witness testified

As an alternative to address the issues promoting Sharyland's proposal, Staff's witness recommended that the TCRF rate design for non-IDR customers be designed such that transmission charges are incurred only for load that occurs during a defined on-peak window, such as a several-hour window on weekday afternoons in the months of June, July, August, or September. Non-IDR demand-metered customers (Secondary > 10 kW and Primary) would be billed based upon their NCP demand that occurs during this on-peak window. Under the current energy charge rate structure for Residential and Secondary ≤10 kW customers, these customers would be billed based upon their kWh usage during the on-system-peak window. Load and energy usage by customers outside of the on-system-peak window would not incur any transmission charges, Staff proposed

Staff's witness said that, "ideally," this mechanism would be implemented via a revision to the TCRF rule. However, Staff's witness said that the Commission could require Sharyland to apply for a good cause exception to the TCRF rule, that would allow Sharyland to propose the changes consistent with Staff's proposal in a standalone proceeding.

Docket 45414

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