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Customer Rate Credit, Other Retail Market Issues Included In Settlement Among Oncor, Sempra, Texas PUC Staff, And Others To Approve Sempra Acquisition Of Oncor

December 15, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott (at) energychoicematters.com

Customer rate credits and other retail market issues are included in a stipulation among Oncor Electric Delivery Company LLC, Sempra Energy, Staff of the Public Utility Commission of Texas, the Office of the Public Utility Counsel, the Steering Committee of Cities Served by Oncor, and Texas Industrial Energy Consumers under which Sempra's acquisition of Oncor would be approved.

The stipulation includes the following provision:

• Name/Logo. The Signatories agree that Sempra will maintain a name and logo for Oncor that is separate and distinct from the names of Sempra’s REP [retail electric provider] and wholesale generation companies or any other current or future Texas competitive affiliate, if any. Any Sempra REP, wholesale generation company, or any other current or future Texas competitive affiliate will not use the Oncor name, trademark, brand, logo, or any other brand identifying features; nor will Oncor engage in joint marketing, advertising, or promotional efforts with any Sempra REP, wholesale generation company, or any other current or future Texas competitive affiliate, in a manner that is inconsistent with the Public Utility Regulatory Act and the Commission’s affiliate rules.

The stipulation also includes the following provision concerning customer rate credits. The stipulation does not provide for a specific mechanism for the payment of rate credits to customers, other than creating a duty for Oncor to work with REPs concerning any mechanism:

• Tangible and Quantifiable Benefits. The Signatories agree that, at a minimum, Oncor will provide the following tangible and quantifiable benefits associated with the Transaction. Oncor will provide bill credits to electric delivery rates for ultimate credits to customers in an amount equal to 90% of any interest rate savings achieved until final rates are set in the next Oncor base rate case filed after Docket No. 46957. Savings will not be included in credits if already realized in rates. Interest Rate Savings refers to the improvement in Oncor’s borrowing costs post-close relative to those costs as of June 30, 2017 due to improvement in credit ratings and/or improvement in market spreads. The Signatories further agree that until final rates are set in the next Oncor base rate case after Docket No. 46957, Oncor will file a report with the Commission every six months detailing any interest rate savings determined by the amount of debt issued by Oncor by at least 0.15% (amounts above 0.15% being based on actual interest rate savings by Oncor) and demonstrating a calculation of the credit. Sempra and Oncor agree to work in good faith with interested parties, including TXU Energy Retail Company LLC, Texas Energy Association for Marketers, Alliance for Retail Markets, and NRG Companies, to determine an acceptable method for implementation of any bill credit to effectuate the settlement agreement, as approved by the Commission. At a minimum, Oncor shall provide REPs 45-day notice of the amount of any customer credits (e.g., for each customer class, the amount per kWh or per-customer credit that would apply) prior to the effective date of the credits and shall implement updated bill credits simultaneously with other changes in Oncor’s rates. In addition, one year after closing, Oncor will present a merger synergy savings analysis to the Commission and provide bill credits to electric rates for inclusion in customer bills in an amount equal to 90% of any synergy savings until final rates are set in the next Oncor base rate proceeding after Docket No. 46957, in which any total synergy savings shall be reflected in Oncor’s rates

The settlement also includes the following conditions:

• Competitive Shopping Platforms. The Signatories agree that neither Oncor nor Oncor’s subsidiaries will host or allow the Oncor name, trademark, brand, logo, or other identifying brand features to be used to promote a competitive retail electric shopping website.

• No Recovery of Affiliate REP Bad Debt. The Signatories agree that for so long as any Sempra REP is affiliated with Oncor, Oncor will not seek to recover from its customers any costs incurred as a result of a bankruptcy of any Sempra REP.

Other conditions of note under the settlement include:

• Affiliate Asset Transfer. The Signatories agree that neither Oncor Holdings nor Oncor will transfer any material assets or facilities to any affiliates (other than Oncor Holdings, Oncor, and their subsidiaries, which are hereinafter referred to as the “ring-fenced entities”), other than a transfer that is on an arm’s-length basis consistent with the Commission’s affiliate standards applicable to Oncor, regardless of whether such affiliate standards would apply to the particular transaction.

• Arm’s-Length Relationship. The Signatories agree that each of the ring-fenced entities will maintain an arm’s-length relationship with Sempra or Sempra’s affiliates (other than the ring-fenced entities), or any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings, consistent with the Commission’s affiliate standards applicable to Oncor. The Signatories agree that Sempra will provide the Commission access to the books and records of Sempra or Sempra affiliates as necessary to facilitate Commission audit or review of any affiliate transactions as between Oncor and Sempra or Sempra affiliates, consistent with PURA § 14.154.

• Separate Books and Records. The Signatories agree that each of the ring-fenced entities will maintain accurate, appropriate, and detailed books, financial records and accounts, including checking and other bank accounts, and custodial and other securities safekeeping accounts that are separate and distinct from those of any other entity.

• Code of Conduct. Oncor will file with the Commission for authority to amend and update its Code of Conduct to incorporate all applicable conditions and limitations on affiliate transactions required by the stipulation. Oncor will conduct its activities in compliance with a proposed updated Code of Conduct that will govern interactions between Oncor and its Sempra affiliates and any entity with a direct or indirect ownership interest in Oncor or Oncor Holdings. The provisions of the updated Code of Conduct that address competitive affiliates will apply to Sempra Gas and Power Marketing and any other Sempra affiliate to the extent they provide services or sell products in a competitive energy-related market in Texas

• FERC Preemption. The Signatories agree that neither Oncor nor Sempra nor Sempra’s affiliates will assert before the Commission or a Texas court of competent jurisdiction that the Commission is preempted pursuant to the Federal Power Act (e.g., under a FERC tariff) from making a determination regarding the cost recovery of affiliate costs sought to be allocated to Oncor.

• Commission Jurisdiction. The Signatories agree that Oncor and Oncor Holdings will not own, operate, or construct capital assets outside of ERCOT without prior approval from the Commission or take any other action that would impair the Commission’s regulatory jurisdiction. Neither Oncor, Oncor Holdings, Sempra nor their respective affiliates will take any action that would subject ERCOT assets to the jurisdiction of the Federal Energy Regulatory Commission (“FERC”); provided, however, that FERC continues to have jurisdiction under sections 210, 211, and 212 of the Federal Power Act (“FPA”) and may direct transmission and interconnection services over certain existing facilities outside of ERCOT; provided further that the existing reliability and critical infrastructure standards administered by the North American Electric Reliability Corporation (“NERC”), through delegation of authority from FERC, may affect the operations of assets that are deemed part of the bulk electric system. Sempra further commits that it will affirmatively support the preservation of the status quo of ERCOT jurisdictional authority, and it will in good faith support the efforts of Oncor to preserve and maintain the current state of ERCOT jurisdiction

• Texas Utility. The Signatories agree that Oncor will continue to operate solely within the state of Texas as a public utility subject to the continuing jurisdiction of the Commission.

• Rate Case Commitment. Except as may be otherwise ordered or required by the Commission, statute, or rule, Oncor agrees that it will not file a comprehensive base rate case within two years of a final order in this case.

Consistent with Sempra Energy's and EFH's merger agreement, the settlement includes regulatory commitments that preserve the existing Oncor ring-fence and the independence of Oncor's board of directors. The commitments also include extinguishing of all debt currently at EFH and Energy Future Intermediate Holding Company LLC.

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