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Texas Retail Providers Seek Authority To Impose Mandatory Deferred Payment Plan (And Accompanying Switch Hold) On Certain Customers

Also Urge Reconsideration Of Calculation Of Existing Prepay Price Cap

October 19, 2018

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Copyright 2010-17
Reporting by Paul Ring •

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The Prepay REP Coalition (Prepay REPs) has urged the Public Utility Commission of Texas to authorize retail electric providers offering prepay service to compel customers to enter into a deferred payment plan (under which a switch-hold could be imposed) under certain circumstances.

Currently, REPs are required to offer deferred payment plans (DPP) in certain situations, but customers are not obligated to accept such a plan. The Prepay REPs argue that prepay customers are arbitraging the cost of being disconnected by a prepay REP offering a deferred payment plan (and the associated cost of paying the plan) versus the costs to enroll with another REP (either prepay or postpay).

The Prepay REPs cited the current rules prohibiting disconnection on weekends and during extreme weather

Under the prepay rule, the REP shall place a residential customer on a deferred payment plan, at the customer's request, when the customer's current balance reflects a negative balance of $50 or more during an extreme weather emergency

"Prepay REPs would respectfully argue that the intent of the statutory language is to allow prepay REPs to recoup funds owed to it by the customer that were incurred during periods of extreme weather through the use of deferred payment plans. However, in implementing this statutory provision, the Commission has left the option to the customer to determine if such assistance is required. While this may work for the post pay model, it fails miserably in the prepay context. As it stands, a prepay customer may create a rather large credit balance on a prepay account during periods of prolonged extreme weather, which appears to have become a norm in recent years. With the existing rule language in place, Prepay REPs cannot place a customer on a deferred payment plan (DPP) (with a switch-hold) without the customer's consent -- even during periods of extreme weather. Upon the expiration of the extreme weather event, Prepay REPs can disconnect the customer for the credit balance (after appropriate notice) or solicit the customer's interest in obtaining a DPP," the Prepay REPs said

"Prepay REPs have found that prepay customers are aware that agreeing to a DPP means they will be unable to switch until the DPP is paid in full, and as a result, has been very unsuccessful in gaining consent from customers. It is Prepay REPs contention that customers are arbitraging the cost of being disconnected by us versus the costs to enroll with another REP (either prepay or postpay). In this manner, Prepay REPs have no effective means for making a customer pay for the power the state required Prepay REPs to provide during the extreme weather event. Further, since the prepay rule prohibits the collection of a deposit Prepay REPs have no effective means for reducing the amount of the unpaid liability," the Prepay REPs said

"To address this issue, Prepay REPs recommends that the Commission modify substantive rule §25.498(i)(1) by removing the phrase 'at the customer's request' from the end of the clause. This would allow Prepay REPs to automatically create a DPP and place a switch-hold on the account when the trigger (a negative balance of $50 or more during an extreme weather emergency) is met. Prepay REPs would provide the terms of the DPP to the customer as presently required by §25.498(i)(9) and such DPP would allow for re-negotiation of the terms should the customer be unhappy with the default DPP offering. This modification would fully comport with the statutory requirement that the REP work with the customer to establish a satisfactory pay schedule for deferred bills and allow the prepay REP to make such repayment more likely to occur before the customer switches to another REP," the Prepay REPs said

The Prepay REPs also contend that it would be helpful if end-use customers were notified that a weather moratorium was in effect. "This electronic notice would allow customers who traditionally just stop paying on a prepay account as a method of shutting off service to be warned that during a weather moratorium this will not occur unless they opt out of the automatic DPP or call-in to request a move-out to de-energize their premise. Prepay REPs regularly experience customers that had no idea that the power would remain on during an event and subsequently refused to pay off the resulting credit balance," the Prepay REPs said

"Prepay REPs contend that modifying how prepay customers enroll on deferred payment plans during extreme weather events in the manner described above would help curb the bad debt that Prepay REPs experience, as well as mitigate the need to increase prepay rates to recover bad debt," the Prepay REPs said

Prepay REPs also raised concern with customers paying via credit or debit card, and then reversing payment, and sought similar authority to place such customers on a DPP, with the ability to impose a switch-hold, if such payment reversal creates a negative balance in excess of $50.

"Prepay REPs have noticed that more and more customers are paying for their electric service with debit and credit cards. While these payments method are convenient, we have also noticed an alarming trend with respect to some of our customers. Specifically, we have noted that an increasing number of customers are reversing payments made via credit and debit cards after the payment has been applied to their account. This appears to be caused by fraud on the part of the person providing the payment information to the REP. When the fraud is discovered by the cardholder, the REP is obligated to refund the payment. Unfortunately, this typically places the prepay account in a credit status and subject to disconnection once notice has been provided. As with the extreme weather moratorium, this allows the customer who submitted the fraudulent payment to receive power for which they may have no intention of paying, which Prepay REPs allege amounts to theft of service," the Prepay REPs said

"The Prepay REPs submit to the Commission that the entire nature of prepay service is a commitment on the part of the customer to maintain a positive account balance. The Commission's rules reflect this by prohibiting the collection of a deposit (security against a non-paying customer). However, the Commission's rules prevent Prepay REPs from requiring payment for services rendered, particularly that which amounts to theft of service, allowing customers to leave, if the cost to do so is lower than paying off the debt incurred. Prepay REPs believe the Commission could modify its rules to prevent this sort of gaming in the prepay market. Specifically, Prepay REPs recommend modifying 25.498(i) by including new language as follows: 'The REP shall place a residential customer on a deferred payment plan if a payment has been rejected or otherwise reversed on an account and such rejection or reversal creates a credit balance of $50 or more,'" the Prepay REPs said

The Prepay REPs also took issue with the current price cap on prepay products. A REP that provides prepaid service to a residential customer shall not charge an amount for electric service that is higher than the price charged by the POLR in the applicable TDU service territory, with three alternative calculations set forth in the rules to determine if the prepay price exceeds the POLR rate

The Prepay REPs noted that the LSP (POLR) energy charge is the sum over the billing period of the actual hourly Real-Time Settlement Point Prices (RTSPPs) for the customer's load zone that is multiplied by the number of kWhs the customer used during that hour and that is further multiplied by 120%.

"The intent of the POLR pricing formula is to mitigate any financial risk the POLR provider may have in serving customers at the last minute, by allowing them to serve at a price basically calculated based on spot market prices. Since POLR service by definition of this pricing formula been limited to post pay service, it is a rather simple calculation to summarize the RTSPPs for the billing period in question to calculate the LSP energy charge," the Prepay REPs noted

"Unfortunately, this has resulted in a backwards looking POLR rate, instead of a forward looking rate, which would be more appropriate for prepay service. Prepay customers typically make small dollar amount 'recharge' purchases, typically around $20 (or about a week's worth of electricity) and it is unnecessarily restricting to be forced to set a price based on the prior months RTSPPs. That is an unnecessary constraint from the prepay perspective," the Prepay REPs said

"Prepay REPs contend that it was the legislature's intent in adopting the language found in PURA §39.107(g) to prevent prepay REPs from setting predatory prices. Prepay REPs contend that the Commission should be open to exploring a new solution that comports with the legislative intent, but better reflects the nature of prepay service," the Prepay REPs said

The Prepay REPs also sought access to real-time meter reads

"[I]t is clear that while meters can be read in real-time, there is no existing requirement for the TDUs to provide real-time read information to the market. Instead, REPs receive two-day old consumption information. This two-day lag creates customer confusion and frustration as [it] relates to prepay service which is billed daily. Due to the two day lag in reads REPs are forced to estimate the customer usage for the first two days of service and given the wide variances in customer usage this can result in significant adjustments to the customer account once the actual reads are received. This is very confusing and frustrating to the customer and would be avoided if the REP could access a real-time read when initiating service," the Prepay REPs said

"A second problematic scenario is created when a customer wants to leave prepay service. We provide daily notification to the customer of the account balance and when terminating service to the customer that is the amount the customer expects to be refunded. However, that account balance is missing meter reads for the most recent two days of consumption. The actual amount of the refund is determined after the last two days of consumption is deducted from the account balance at the time service to the customer was terminated. This is very confusing and frustrating to the customer and would be avoided if the REP could access a real-time read at service termination," the Prepay REPs said

Citing various substantive rules, the Prepay REPs said, "It is clear from these requirements that the intent is that REPs should be able to reflect real-time read information into their account balance calculations. The limitation that exists is that REPs, at present, do not have an effective means of accessing real-time TDU meter read information. Please note: As an interim solution, Prepay REPs can solve most of the consumer confusion and frustration cited in this section if yesterday's gross meter consumption was provided within 2 hours after the day ends. This might be a more easily solved than real-time reads. The ultimate goal would obviously be real-time reads for prepaid service."

"Therefore, we strongly encourage the Commission to undertake any efforts to ensure that REPs and customers have, and maintain access, to real-time meter read information. To that end, we are filing comments in Docket 48525, Rulemaking to Review 16 TAC 25.130 Relating to Advanced Metering, to ensure that HAN functionality remains, as it may provide a means of obtaining such data," the Prepay REPs said

For the purposes of filing the comments, the Prepay REP Coalition was comprised of Pogo Energy, LLC and Brooklet Energy Distribution, LLC

The comments were filed in Project 48551, the ERCOT market summer performance review

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