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Texas PUC Staff Oppose Retail Electric Provider's Sought Declaratory Order That Would Affirm REPs May Level Prepaid Customers' Account Balance

January 27, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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Staff of the Public Utility Commission of Texas have filed a brief opposing the relief sought by Pogo Energy in Pogo's petition seeking a declaratory order concerning the construction of Substantive Rule 25.498(a) as it relates to a proposed offering of a levelized payment option for prepaid service

As first reported by, Pogo in its petition said that it, "is in the process of developing a proposed service plan that customers could opt-into or opt-out of at any time, without restrictions, and would operate on a daily basis to level (or smooth) the impacts to a customer's prepaid account balance."

"Under this plan the customer would be billed each day for actual usage consistent with § 25.498, and a post-billing adjustment (leveling payment plan) would be applied to smooth changes to a prepaid customer's billing account. (Absent such smoothing, daily charges can vary by as much as 400%.," Pogo said in its petition

In its petition, Pogo reported that, in discussions with Pogo about the plan, Staff from the PUC's Oversight and Enforcement division have expressed the view that the proposed service plan is inconsistent with § 25.498(a) and the preamble to § 25.498, as adopted in 2011.

The relevant language from § 25.498 is as follows: "The following provisions do not apply to prepaid service, unless otherwise expressly stated: (1) §25.479 of this title (relating to Issuance and Format of Bills); (2) §25.480(b), (e)(3), (h), (i), (j), and (k) of this title (relating to Bill Payment and Adjustments)". Subst. R. § 25.480(h) requires post-pay REPs to offer level or average payment plans

As previously reported, Pogo argues that the Commission rules do not mandate that prepay REPs must offer a level or average payment plan (as is the case for postpay service), but that nothing in the rule (or the rule's preamble) prohibits REPs from electing to offer a level or average payment plan to prepay customers if the REP so chooses

PUC Staff disagrees with Pogo's interpretation. Staff said that the language at § 25.498(a) removes the option for prepay REPs to offer a level or average payment plan

In a brief, Staff said, "Staff acknowledges that the language of 16 TAC § 25.498(a) does not explicitly prohibit a level or average payment plan. The relevant language in 16 TAC § 25.498(a) states, 'The following provisions do not apply to prepaid service, unless otherwise expressly stated . . . (2) § 25.480(h).' Subsection (h), relating to bill payment and adjustments, specifically details the conditions under which a REP may engage in level and average payment plans for non-prepaid services. The language of 16 TAC § 25.498(a) implicitly states that a prepaid service provider may not use the kind of level or average payment plans detailed in 16 TAC § 25.480(h) -- they 'do not apply' for prepaid plans. Put another way, the language of the rule removes the option for a prepaid service provide [sic] to offer a level or average payment plan."

Staff further said, "In the relevant rulemaking proceeding, Project No. 38675, the Commission addressed this topic. Therein, the Commission declined a request to establish a prepaid level or average payment plan option stating, 'the Commission concludes that it should not impose a levelized payment option for prepaid service at this time' ... Pogo interprets this statement as meaning that the Commission did not want to impose a requirement on a prepaid service to offer a levelized prepayment plan. Staff's interpretation differs. By declining to impose the option for a levelized payment plan for prepaid service, Staff believes that the Commission was removing the possibility for prepaid services to offer levelized payment plans. With this removal, the Commission was effectively disallowing level payment plans as an option for REPs offering prepaid services."

Staff expressed concern that allowing a REP to offer a level payment plan to prepay customers would expose customers to risks from which the Commission had sought to protect customers, since any such prepay level payment plan would, under the explicit language of the rules, not be subject to the customer protections contained in § 25.480(h) for level and average payment plans (as the provisions under § 25.480(h) "do not apply" to prepaid service" under the rule)

"Prepaid customers are often some of the most vulnerable consumers in the market — many customers choose prepaid services because they cannot pass a credit check or afford to set aside money for deposits. Allowing REPs to offer plans lacking the basic protections afforded to postpaid customers under 16 TAC § 25.480(h) cannot be what the Commission intended in promulgating the rule," Staff said

Staff further said that Pogo's proposal would entail estimated consumption which 16 TAC § 25.498 prohibits

"The proposed plan consists of two elements: daily actual usage and a post-billing adjustment based on a customer's usage over a broader time period to level the daily impacts on the customer's prepaid account balance. This adjustment based on a customer's broader usage creates a situation where the daily current charge is not solely grounded in actual usage and known fees. Instead, the daily actual usage is modified by an average of broader historical data which ultimately creates an estimate," Staff said

Staff noted that, "16 TAC § 25.498(c)(6) states, '[a] REP shall calculate the customer's current balance by crediting the account for payments received and reducing the account balance by known charges and fees that have been incurred, including charges based on estimated usage as allowed in paragraph (11)(E) of this subsection.' The estimates allowed in paragraph (11)(E) are described as, '[a] REP shall not . . . base charges on estimated usage, other than usage estimated by the TDU or estimated by the REP in a reasonable manner for a time period in which the TDU has not provided actual or estimated usage data.' That allowance delineates the limited situation in which charges may be based on estimated usage."

"Here, Pogo has access to and its plan even relies upon having the actual daily usage data as one element of its daily current charge. That data will not be the result of a TDU failing to provide actual or estimated usage data. As such, Pogo's proposed plan fails to meet the requirements for the limited allowance to use estimated charges as contemplated by paragraph (11)(E). Therefore, Pogo's proposal is not based on known charges and fees, but instead on estimated consumption which 16 TAC § 25.498 prohibits," Staff said

In its brief, apart from reiterating its arguments set forth in its original petition (see discussion here), Pogo said that policy considerations support latitude for REPs

"The Commission has recognized that competition is characterized by competition on price, but also on innovation in offering goods and services to potential buyers. The Commission has typically approached its competition rules in a manner that is consistent with this idea, leaving broad discretion to REPs in shaping plans and retail practices, so long as they are not inconsistent with the rules," Pogo said

Quoting the 2011 preamble which set the current rules, Pogo noted that the PUC has stated, "The commission's objectives for the new rule are to establish a set of baseline protections for customers, while giving REPs broad latitude in developing prepaid service options for customers. . . . Giving REPs broad latitude should result in a diversity of options, many of which are likely to be attractive to large numbers of customers. . . . The commission also believes that competition will spur REPs to offer terms that are more attractive to customers than the baseline protections afforded in the rule, as they design options intended to attract customers."

Pogo also said that Staff's interpretation departs from the plain meaning of the rule, and further said, "If there is a potential for the staff to espouse or the Commission to adopt interpretations of the Commission's competition rules that are not based on the plain language of the rule, then REPs would have to be very cautious about the innovations they might incorporate into their service plans or operating procedures. Encouraging innovation also recognizes that customers, to a large degree, will decide on the plans and practices that they want in signing up for a REP's service and deciding whether to continue with that REP, and in most instances the Commission has no role to play."

Pogo also said, "The current Pogo circumstances provide a prime example of the consequences of the staff s adopting an interpretation of a competition rule that is not based on the plain meaning of the section staff construes. If Pogo is successful in obtaining a decision from the Commission that the rule does not prohibit prepaid REPs from offering level or average payment plans, then Pogo will be able to offer the service plan that it has been developing. The staff's interpretation, however, will result in a cost in time and money expended on meeting with staff and prosecuting this proceeding for a declaration. It will also result in a loss of competitive advantage, if the service plan is put into place and customers find it attractive, because other REPs now know that Pogo has such a plan in the works and could begin working on developing similar plans. Absent the delay resulting from staff's interpretation of the rule, other REPs would not have learned about Pogo's service plan until it began offering it to customers."

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