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Texas PUC Chair: Settlement's Use Of Territory-Specific (Not System-wide) Rates In AEP DCRF (Charged To REPs) Contradicts PURA

August 30, 2018

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Reporting by Paul Ring • ring@energychoicematters.com

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In a memo in advance of today's open meeting, Texas PUC Chairman DeAnn Walker said that an unopposed settlement that would establish new Distribution Cost Recovery Factors (DCRF) at AEP Texas, which would set rates on a territory-specific basis (unique rates for Central, North divisions), is contrary to the language in PURA which requires that a DCRF be applied on a system-wide basis

As previously reported, the unopposed settlement would have set new DCRF rates charged to REPs with rates unique to the Central and North divisions at AEP Texas (see rates in our prior story)

Walker in her memo wrote, "I am concerned that the rates established under the agreement are not in compliance with Public Utility Regulatory Act (PURA) § 36.210(a)(5). The section allows for periodic rate adjustments to capture distribution investments, known as a distribution-cost recovery factor or DCRF, but requires that the adjustments 'be applied by the electric utility on a system-wide basis.' Under the settlement agreement, separate DCRF rates are to be implemented for the central division and the north division. Therefore, the separate rates in the agreement of the parties are not applied on a system-wide basis for AEP Texas. Because the proposed order correctly determines that AEP Texas is the utility under consideration in the DCRF proceeding, system-wide rates would require a rate that is in effect for the entire AEP Texas system."

"I understand that the Commission's final order in Docket No. 46050 ordered AEP Texas to 'maintain separate TCC and TNC divisions, which will continue to charge separate rates and riders, and maintain separate tariffs, unless and until such time as the Commission may consider and approve consolidated rates and tariffs.' However, the Commission's order in this proceeding cannot contradict PURA by establishing two separate rates that are not system-wide rates. Currently, the proposed order that adopts the settlement agreement does not comply with PURA § 36.210(a)(5)," Walker wrote

"In order to address my concerns, I would like to provide the parties an opportunity to develop possible solutions to ensure that the settlement agreement complies with PURA § 36.210(a)(5). Therefore, I propose allowing time for the parties to discuss the issues raised in this memorandum and submit proposals for a resolution. The Commission can consider these proposed solutions at a later open meeting," Walker wrote

The final settlement rates had been proposed to take effect September 1, 2018. Interim rates (identical to the proposed final rates) have already been approved to take effect on September 1

Deviation from the settlement rates would implicate a number of issues for REPs, including: treatment of amounts collected under interim rates, timing of implementation of final rates, advance notice of such rates, etc.

Docket 48222

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