SWEPCO Opposes Declaratory Order For Retail Choice Pilot, Says Pilot Only Available Under Transition To Competition Process, And Legislature Has Found Area Not Ready For Competition

October 8, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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Southwestern Electric Power Company (SWEPCO) has filed a response at the Texas PUC to East Texas Salt Water Disposal Company's (ETSWD) petition for declaratory order and request for the opening of a pilot retail electric choice implementation project at SWEPCO, with SWEPCO stating that a pilot may only be conducted as part of a larger transition to competition process, and that the PUC and legislature have found that its applicable power region is not ready for retail competition.

ETSWD's petition for launch of a retail electric choice pilot at SWEPCO had been exclusively first reported by EnergyChoiceMatters.com in September (see story here)

SWEPCO stated, "On September 8, 2020, East Texas Salt Water Disposal Company (ETSWD) requested the Commission issue a declaratory order to resolve an alleged statutory dispute. No such statutory dispute exists, and therefore no declaratory order from the Commission is necessary."

SWEPCO stated, "ETSWD alleges that it is requesting the Commission resolve a question of law. ETWSD's petition describes its purpose as seeking the Commission's opinion on the 'narrow question of whether a Pilot Project in the SWEPCO service territory is permissible under PURA.' No dispute regarding permissibility exists. In 2009, the Legislature added Subchapter K to PURA Chapter 39, which governs the introduction of retail competition in SWEPCO's service territory, including provisions for a pilot program. Section 39.503 of Subchapter K provides the Commission with the authority to open a customer choice pilot project in SWEPCO's Texas service territory, but only as an intermediate step in the introduction of retail competition in SWEPCO's Texas service territory. The Commission and more recently the Legislature have found that SWEPCO's Texas service territory is not ready for retail competition,"

SWEPCO stated, "The Commission need not expend resources to resolve ETSWD's alleged dispute of law."

SWEPCO stated, "ETSWD's petition misrepresents SWEPCO's position regarding the 'narrow question' it asks the Commission to address. ETSWD's petition states, 'SWEPCO contends that a Pilot Project is precluded by legislation that was passed in 2009,' and it is 'SWEPCO's position that a Pilot Project is no longer authorized by statute.'"

SWEPCO stated, "These statements are not true. Counsel for SWEPCO summarized its position to counsel for ETSWD in an e-mail dated August 5, 2020: 'It does not appear to us that SWEPCO could initiate a pilot project outside of the statutory transition to competition process defined in § 39.503. PURA contemplates a customer-choice pilot project not as a stand-alone program but, instead, as one of many steps in the process of a power region's transition to retail competition. We are not aware that the Commission or SWEPCO's power region authority, the Southwest Power Pool (SPP), are actively taking the statutory steps to transition SWEPCO's service territory to retail competition. In fact, the Commission has found multiple times that the power region in which SWEPCO operates is unable to offer fair competition and reliable service to all retail customer classes, most recently in 2006 in Project No. 32104. The Legislature made the same finding in 2009 in PURA § 39.501(b).'"

SWEPCO stated, "SWEPCO does not dispute that PURA allows the Commission to open a retail choice pilot project in SWEPCO's Texas service territory. However, PURA contemplates retail competition pilot programs as one of the many steps in the statutory process set-up for SWEPCO's transition to competition, not as an end to itself. In addition, PURA § 39.104(a), which PURA § 39.503(c)(1) incorporates, contemplates that the Commission is to use such pilot projects 'to evaluate the ability of each power region and electric utility to implement customer choice,' and not simply pursuant to customer request that a pilot program be initiated. SWEPCO sits within SPP's power region. Therefore, any evaluation conducted to determine whether customer choice should be implemented for SWEPCO would also need to be part of a larger consideration regarding SPP's readiness, as the power region, to implement customer choice. PURA's requirement that the load designated for the pilot be distributed across all customer classes and that a portion be set aside for aggregated loads underscores this point."

SWEPCO stated, "PURA § 39.503 controls SWEPCO's transition to competition process. Under that provision, a pilot program is one of three activities that must occur within one of five total stages set forth as part of the transition to competition process. SWEPCO acknowledges that PURA § 39.503 permits the Commission to modify the sequence of events required by Subsections (b)-(e) -- stages one through four of the process -- but not the substance of the requirements. However, a pilot project would be difficult to implement without completion of the steps in the first stage set out in PURA § 39.503(b) prior to implementation of a pilot project pursuant to a Commission and stakeholder effort to transition SWEPCO to retail competition. For example, the Commission created the market framework before a pilot program was opened in ERCOT: 'The commission, with the help of market participants and other interested persons, has successfully established a retail electric market in the portions of Texas covered by the Electric Reliability Council of Texas (ERCOT). In order to make the transition to retail competition in ERCOT in accordance with the statutory timelines of PURA, the commission and the market participants engaged in various proceedings to restructure the existing electric utilities, develop protocols for the market, and expand the responsibilities of ERCOT as the independent organization for the ERCOT power region. These steps were completed before the commission opened a pilot project in ERCOT and determined that the market was ready for retail competition.'"

SWEPCO stated, "The Commission has already determined that the portions of Texas within the Southwest Power Pool are not ready to transition to retail competition. The Legislature confirmed the Commission's determination in that regard in 2009 when it passed PURA § 39.503 that set out the process that must be followed if SWEPCO were ever to transition to retail competition. ETSWD does not dispute these determinations previously made by the Commission and Legislature."

SWEPCO stated, "As an alternative to its primary assertion, ETSWD claims that 'the original SWEPCO Pilot Project' has not been terminated by the Commission and therefore remains available customers. The Project No. 23076 pilot project initiated in SWEPCO's Texas service territory two decades ago was superseded by the 2009 legislation codified as PURA Chapter 39, Subchapter K, which delayed the implementation of retail competition in SWEPCO's service territory. With limited exception, § 39.502(b) of Subchapter K makes the rest of Chapter 39 inapplicable to SWEPCO. It was the rest of Chapter 39 that had been the basis for SWEPCO's Project No. 23076 pilot project. In its place, § 39.503 sets out the legislatively mandated and sequenced events discussed above that must take place before the implementation of retail choice in SWEPCO's Texas service territory."

SWEPCO stated, "ETSWD's petition raises no dispute of law that needs to be resolved by the Commission. Therefore, SWEPCO requests the Commission decline ETSWD's request for a declaratory order."

[all emphasis in quotes originally by SWEPCO]

Docket 51257

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