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AEP Texas Intends To Propose System-Wide Distribution Rates Applicable To REPs In Upcoming Rate Case

Files System-wide Rates Cost Study, Says System-wide Rates Do Not Lead To Significant Bill Impacts For Customers, Except For Primary Service

December 21, 2018

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Reporting by Paul Ring • ring@energychoicematters.com

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AEP Texas filed a study examining the difference in costs that would occur under delivery rates that are separate for its Central and North divisions, versus introduction of system-wide rates.

AEP Texas was required to file the study as a condition of merging the separate Central and North operating companies into a single utility

In the report, AEP Texas stated, "AEP Texas intends to propose System-wide rates in connection with this base rate proceeding," referring to the rate case that is to be filed by AEP Texas on May 1, 2019 (based on adjusted 2018 test year data).

Even under system-wide rates, only customers in the Central division would pay the Transition Charge and Nuclear Decommissioning charge riders. Otherwise, rates and riders would be identical for customers across all divisions upon the introduction of system-wide rates

Ignoring the impact of changes in AEP Texas' cost of service and allocators since base rates were last established based on 2006 data, AEP Texas said, "the difference between System-wide rates and Divisional rates does not in most instances lead to significant bill impacts to AEP Texas customers."

Ignoring the impact of changes to base rates unrelated to instituting system-wide rates, AEP Texas said that, with the exception of the Primary Service classes, the base rates of all North Division customer classes will see a decrease with the move to system-wide rates.

Notably, an average customer in the Primary Service - NCP rate class in the North division would see an increase of 14.1% in the delivery bill

Ignoring the impact of changes to base rates unrelated to instituting system-wide rates, in the case of the Central division, with the exception of the Primary Service rates, AEP Texas said that customer classes will see an increase in rates with the move to system-wide rates. Central division Primary Service customers would experience a decrease with the move to System-wide rates. However, AEP said that it should be noted that when the expiration of Transition Charge 2 (TC2) occurs in October 2020, all rate classes in the Central Division will see an overall decrease in rates. "This remains the case even with the addition of a new System Restoration Charge (SRC) to recover Hurricane Harvey costs, since the new SRC will be significantly smaller than TC2," AEP Texas said

Specifically, for residential customers using 1,000 kWh per month, residential customers at AEP Texas North would see a decrease of about 0.8¢/kWh under the move to system-wide rates (about a 20% decrease), ignoring the impact of changes to base rates unrelated to instituting system-wide rates

For residential customers using 1,000 kWh per month, residential customers at AEP Texas Central would see an increase of about 0.1¢/kWh under the move to system-wide rates (about a 3% increase), ignoring the impact of changes to base rates unrelated to instituting system-wide rates

AEP Texas further said that, "each Division’s class customer count, class distribution billing determinant (kWh and kW) data, and allocation statistics have changed, and relationships among the classes have shifted, since the time base rates were last established, in cases that used a test year period ending in June 2006. These shifts, and their impact on AEP Texas cost allocation and rate design, are wholly independent of the proposed rate consolidation. They will occur regardless of rate consolidation between the Divisions, and although they are not the focus of this study, they are important to note and will be important topics in the upcoming rate case; therefore AEP Texas has presented information related to these impacts as part of this study."

Under the updated billing determinants, before the application of system-wide rates, certain classes would see significant rate increases, though, as noted, such increases are unrelated to implementation of system-wide rates.

Notably, an average customer in the Primary Service - NCP rate class in the North division would see an increase of 37% in the delivery bill based on the new billing determinants under Divisional rates. With system-wide rates, this impact is only a 14% increase

An examination of an average customer taking service under the Secondary > 10 kW 4CP rate schedule shows that Divisional rates under the updated billing determinants will produce a 9.6% increase from the total current wires bill for the average Central customer taking service under this rate schedule. When the System-wide study rates for the class are introduced, the impact on the average Central customer becomes a 10.5% increase, which is only .8% higher than the updated Divisional rate under the new billing determinants.

See AEP's study here for costs under divisional and system-wide rates, compared to current Divisional rates and compared to the new Divisional rates that would otherwise apply under the updated billing determinants

Docket 46050

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