Texas Retail Electric Providers Seek Clarification On Customer Relief Program, Late Payment Fees; Air Concerns

REP Makes Note Of Unpaid Balances Accrued Since First Disconnection Moratorium In March

April 13, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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The Texas Energy Association for Marketers filed comments with the Texas PUC seeking clarification of the PUC's COVID-19 Electricity Relief Program, under which eligible residential customers may not be disconnected for non-payment, as well as certain contemporaneously issued rule waivers

See background on the Electricity Relief Program here

In brief, REPs will be reimbursed for energy charges at a rate of $0.04/kWh for customers in the program, and delivery charges (except securitization charges) will not be charged to REPs

TEAM noted that the PUC's March 26th Order provided an unspecified exception to the rule regarding late fees in the competitive retail electric market, 16 Texas Administrative Code (TAC) §25.480(c).

"In keeping with the efforts to provide as least disruption as possible to the competitive market systems and to incent those who can pay to pay timely, we request clarification that any regulatory mandate for late fees be limited to those customers on the COVID-19 Relief List," TEAM said

"The policy reasons underlying this request are consistent with what we understand the Commission’s goals to be in this circumstance. For customers who are able to pay, the contractual late fee serves to encourage customers to pay timely. The timing of the customer payments lags the timing of 'REP' payments to power suppliers. Late customer payments also lag the REPs obligation to pay the transmission and distribution utilities ('TDUs'). Further, late fees mitigate (but do not necessarily offset) costs incurred by REPs when carrying the customer’s past due balance, as well as the costs incurred to provide customer services such as communication with customers regarding the unpaid past due balance. Especially in a time where REPs are mandated to extend credit through deferred payment plans, and are incurring losses related to the disconnection moratorium associated with the COVID-19 ERP, it is even more imperative that a blanket late fee waiver not be imposed," TEAM said

"Any waiver of late fees should be narrowed to the customers who are most vulnerable in order to mitigate the financial strain on the entirety of the retail market and the remainder of the customers who pay timely," TEAM said

Accordingly, TEAM requested the Commission consider the following clarifying language: "Based on the exception to 16 TAC 25.480(c) REPs may not charge late fees to premises while the premise is on the COVID-19 ERP eligibility list."

Turning to the COVID-19 Electricity Relief Program, TEAM sought clarity on several points

TEAM noted that there are existing avenues (traditional deferred payment plans (DPP), assistance agencies) that customers may first use if they express an inability to pay

TEAM noted that there may be some customers who are unable or unwilling to pay or enter into a DPP. "Where there is a regulatory moratorium on disconnection for these customers the COVID-19 ERP provides a mechanism to socialize some of the cost of this financial assistance to customers," TEAM said

Accordingly, TEAM said that if the Commission could issue clarifications, the ERP fund can be targeted to reach these customers:

1. Not all low-income and unemployed individuals will need full relief from the ERP Fund for their electric service costs.

2. When a REP seeks reimbursement from the COVID-19 ERP to continue to provide service to a customer who would otherwise be subject to disconnection, the customer should receive relief for the costs reflected in the invoices that forms the basis of what would otherwise be a disconnection.

3. Unless and until a customer becomes current on payment, the customer will continue to receive financial relief under the ERP Fund.

Concerning verification of customer ERP eligibility, TEAM said, "Because the ERP is requiring all REPs to create new systems to implement the policy, the more opportunities there are to rely on established market mechanisms and to create automated cross-checks that do not rely on the human eye and manual data entry, the higher the chance of successful implementation. In this regard, it would provide a safeguard to ensure that the TDUs have access to the list of ESI-IDs (without customer identifying information)."

Accordingly, TEAM requested the following clarification be issued: "The Commission shall provide the TDUs with the ESI-IDs that are on the COVID-19 ERP list pursuant to the Commission’s standing protective order. This list provided to the TDUs will not include any customer-specific identification."

"This provision will help to ensure uniform implementation and mitigate misinterpretations or misunderstandings with regard to implementation of the intended disconnection protections, and will avoid improper submittals for draws on the Fund. Once the Commission authorizes the TDUs to have the list of ESI-IDs eligible for the COVID-19 ERP, the customers and stakeholders can work with Staff to ensure more reliable implementation and cross-checks for the ERP," TEAM said

TEAM also stressed the impact that extra-market emergency actions have had on REPs

"The Commission took swift action following the Governor’s Disaster Declaration as reflected in the Emergency Open Meeting held on March 16, 2020. Following that meeting, the TDUs took the Commission’s lead and ceased disconnections for all customers regardless of customer class. That disconnection moratorium continued through March 29, 2020. The Commission subsequently ordered the REPs to cease disconnections of all customers who qualify for the COVID-19 ERP. All of these actions have had significant financial impact on the competitive retail electric market," TEAM said

"While the TDUs will experience some deferral of revenue, they will experience no loss of profit, and will in fact, earn a return on any deferred revenues. Payments to wholesale power suppliers and generators are also not directly affected by these extra-market regulatory actions unless REP defaults occur in the ERCOT market. These extra-market regulatory actions have created direct financial losses for REPs that will never be recouped. Even if there is some deferral of revenue through customers voluntarily entering into a deferred payment plan, that deferral does not come with an opportunity to earn a return on the deferred amounts. TEAM is not asking for a redesign of the market and cost of service ratemaking, nor are we looking for a regulatory mechanism for full recovery of REP direct costs and profits; however, we do request that the market be allowed to work, and that where fundamental market rules are changed, REPs not become the shock absorber that is required to support other segments of the market," TEAM said

Separately, Direct Energy filed a letter with the PUC on various aspects of the ERP and, "to provide transparency into the voluntary and compliance measures Direct Energy has taken toward serving residential customers."

In the letter, Direct Energy wrote that, "While the Commission has determined to begin the reimbursement process as of April 20, 2020, it is critical to remember that all customers have been under a disconnection moratorium since March 17, 2020 given the action of the TDUs. Direct Energy is hopeful that the Commission will conclude that reimbursement for all unpaid balances since the earliest responses to this crisis – and through the end of the ERP – will eventually be paid. Direct Energy appreciates the Commission’s efforts to establish the ERP and looks forward to ongoing discussions about the effectiveness of the program as the COVID-19 situation continues to develop in our state."

Direct Energy further stated in the letter that, "Although the [ERP] reimbursement is intended to help customers with their bills, it is also intended to help stabilize the electric industry with what will undoubtedly be significant bad debt expense, cash flow shortfalls, and much higher working capital costs for REPs. The Commission stated publicly in its FAQs that the 'losses' from the ERP will be borne exclusively by REPs.6 The company is hopeful that the Commission will undertake reasonable measures to ensure just and fair compensation to all market participants who are stepping up to help stabilize the power market during this uncertain time."

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