Texas ALJs Propose Approving New Inadvertent Gain Fee Applicable To Retail Electric Providers

ALJs Recommend System-wide Rates For AEP Texas Central, North; Though Tax Refund, Transition Cost Riders Would Be Unique

ALJs Would Deny Relief Sought By REPs On Several Issues

November 11, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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In a proposal for decision in AEP Texas's rate case, a group of Texas ALJs have proposed approving a new Inadvertent Gain Fee applicable to retail electric providers

Under the proposal for decision (PFD), the Inadvertent Gain Fee would be $27, which is the level originally proposed by AEP Texas

"An inadvertent gain is when a REP selects an incorrect premises (ESID) from ERCOT when they perform a switch or move in request from a customer. If this action occurs in conjunction with a move in request, it puts an incorrect customer at the premises and incorrectly forces the existing customer out of the premises. If it occurs in conjunction with a switch request, it incorrectly switches the existing customer to the wrong REP," a witness for AEP Texas had said in the proceeding

"The Inadvertent Gain fee will be charged to a REP that has selected an incorrect premises from the ERCOT portal for a switch or move-in and the Company is required to correct the inadvertent gain," a witness for AEP Texas had said

The ALJs said that, under the AEP proposal which is recommended to be adopted, no Inadvertent Gain fee would be assessed until both the gaining REP and the losing REP agree an inadvertent gain has occurred, and full compliance is achieved with the procedures and requirements of ERCOT Market Guide 7.3, which addresses in detail the identification and resolution of potential inadvertent gains

"The ALJs recommend that AEP Texas's proposed inadvertent gain tariff provision be approved. ARM alleges that the inadvertent gain fee is unreasonably discriminatory under PURA § 36.003(b) because no other discretionary service charge operates in this manner. However, PURA § 36.003(b) prohibits unreasonably discriminatory rates as 'to each class of consumer.' There is no evidence that the proposed fee, if discriminatory, is unreasonably so. On the contrary, the fee is calculated to shift costs off of base rates to the party causing the costs, namely the REPs. Moreover, no fee is assessed until both the gaining REP and the losing REP agree an inadvertent gain has occurred. Thus, only those inadvertent gain MarkeTrak issues that reach completion will be charged. Those that do not reach completion will continue to be recovered through base rates," the ALJs said in the PFD

"The fee properly places the costs on the party incurring it, consistent with cost causation principles, and moves those costs out of base rates, and thereby incenting the REPs to reduce the number of inadvertent gain occurrences. The ALJs find this rate is just and reasonable," the ALJs said

In other tariff matters, the ALJs would adopt the proposed elimination of the ratchet currently applied in determining the distribution service charge for the Secondary Greater than 10 kW class.

Additionally, the ALJs would adopt a clarification stating the Transmission Service Charge, including charges associated with the TCRF Rider, "will be based on the customer's ERCOT average 4CP demand for all new customers with maximum loads over 700 kW taking service under the Secondary Voltage > 10 kW Service and Primary Voltage Service and for all existing customers that were previously billed Transmission Service and TCRF charges based on their 4CP demand."

The ALJs would approve AEP Texas's proposed pricing changes for other uncontested discretionary fees, which were not contested in the case (see prior story for proposed changes)

Under the proposed order, costs currently recovered through the Advanced Metering System Cost Recovery Factor Rider (AMSCRF), which is scheduled to terminate in December 2020, would be moved into base rates.

The ALJs propose adopting consolidated, system-wide rates for the AEP Central and AEP North service areas (apart from historic transition, decommissioning and similar riders applicable to AEP Central, and different amounts for a tax refund rider discussed below)

Because, under the ALJs' recommendations for various issues in the rate case, the PFD would result in a reduction in delivery rates, the ALJs do not propose to implement any rate moderation in adopting uniform, consolidated rates for the Central and North divisions

TIEC had sought rate moderation on the premise that legacy North Division transmission and primary classes are facing rate increases of, as calculated by TIEC, 140.1%, and 55.2% respectively. The ALJs noted that, "Although AEP Texas disputes these exact numbers, this concern depends on the Commission adopting AEP Texas revenue requirement as filed and does not account for the adjustments in AEP Texas's rebuttal cost of service, or any of the other recommended adjustments."

"Given the substantial decreases in revenue requirements recommended by the parties, the likelihood that the increase to any one customer class will be particularly harsh or excessive or promote rate shock is low. Finally, the ALJs agree that it would be wrong to continue the subsidy that these customers enjoyed for the past 13 years, even if through no fault of their own. Accordingly, the ALJs recommend that the Commission set rates at cost and reject rate moderation in this case," the ALJs said

The ALJs would adopt AEP Texas' proposed Income Tax Refund (ITR) Rider to reflect refunds related to federal tax cuts, except that the ALJs would establish unique amounts for the ITR Rider for the Central division and North division, respectively (rather than using a uniform amount across both service areas)

Rather than a volumetric charge, the Income Tax Refund Rider (ITR) would be applied as a percent of a REP's distribution charges.

The monthly Income Tax Refund Class Factor (ITR) would provide for an adjustment to the monthly Base Rate Charges of each applicable rate schedule. "The REP on behalf of the Retail Customer, will be credited the Income Tax Refund based on the monthly credit factor for each rate class (ITR Factor) multiplied by the Retail Customer’s monthly base rate revenue during the effective period," a proposed tariff states. Base rate revenue includes, the Customer Charge, the Metering Charge, the Distribution System Charge, and the Facilities Charge for Lighting Customers

AEP Texas's proposed ITR factor for distribution service was 3.35% for all customer classes, to be applied on a system-wide basis

However, the ALJs recommended that territory-specific ITR factors be adopted.

"The ALJs agree with OPUC that separate riders for the North and Central Divisions are appropriate. The combined refund for both divisions leads to an average refund of 3.35% of customer billings. However, if the percentages are calculated separately, Central Division customers would get 2.72% of customer billings, and North Division customers would get 5.83% of customer billings. This difference is significant. Further, as asserted by OPUC, the ITR Rider is intended to refund amounts included in historical rates that differed by division. Therefore, it is appropriate to have separate riders so that customers may receive refunds that more accurately reflect the amounts they have paid, and the ALJs recommend that separate ITR riders are put in place for the North and Central Divisions," the ALJs said

The ITR Rider would refund the amounts related to tax savings over a period of four years.

The ALJs would deny relief requested by REPs on several issues

ARM and TEAM proposed that REPs should be given at least 45 days before rates set in the case take effect to accommodate the 45-day notice they are required to provide their customers when rates change.

The ALJs would deny this request

"ARM and TEAM cite no legal authority to address their concern in this docket, absent future actions that extend the time for the Commission to issue its final order in this case. The ALJs regard questions as to the timing of the Commission's final order in this case, and whether to initiate a rulemaking to address the REPs' concern, as issues for the Commission. Consequently, the PFD does not address them further," the ALJs said

Additionally, ARM had requested that, if the Commission adopts system-wide rates, then the Commission should direct AEP Texas to include a matrix showing any legacy rate differentiation (e.g. remaining transition cost riders unique to each service areas) within its service territory in the appropriate section of its consolidated tariff and that be posted in an easily accessible and conspicuous area on its website

"The ALJs conclude that a matrix of the type described by ARM is unnecessary," the ALJs said

The ALJs would approve AEP Texas's proposal to move recovery of all transmission expenses to the TCRF

The ALJs would reject PUC Staff's proposal to require AEP to annually update its 4CP allocation factors for the TCRF. "Any such departure from the current rules should be implemented through a rulemaking," the ALJs said

The ALJs conclude that wholesale transmission cost recovery should be based on the ERCOT 4CP at the source (i.e., adjusted for line loss), in accordance with PURA § 35.004(d) and 16 TAC § 25.192. For the same reasons, the ALJs reject OPUC's position to use a 60-minute interval, rather than a 15-minute interval. The ALJs would also reject a TIEC proposal for a UFE adjustment to the 4CP data

Concerning distribution demand cost allocation, the ALJs find the 1NCP (versus the currently used 12NCP) more reasonable because it more accurately reflects cost causation and is consistent with Commission precedent. However, the ALJs would adjust the 1NCP residential summer peak data to the September 2018 allocation factor of 53.56%.

Docket 49494

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