Texas REP Proposes That POLR Service Be Bid Out, PUC Would Select Best Offer

July 7, 2021

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Texas stakeholders filed with the Texas PUC proposals regarding potential changes to Provider of Last Resort pricing

As first reported by EnergyChoiceMatters.com, as part of a strawman to implement HB 16, Staff asked for comment on the interaction of the statutory ban on the provision of wholesale indexed products to small customers, defined as a direct pass-through of real-time settlement point prices determined by ERCOT, and the existing POLR pricing rules. Under 16 TAC §25.43, one component of the rate that Provider of Last Resort (POLR) providers are allowed to charge is the Real-Time Settlement Point Price (RTSPP) for the customer’s load.

If the PUC considers changes to POLR pricing, Octopus Energy recommended that the Commission consider requiring potential providers to bid to serve the customers that need this service, with the Commission selecting the best offer.

"This approach is used in other competitive energy markets and ensures that customers that are subject to an involuntary transition are protected as much as possible from unexpected price increases," Octopus said

Octopus said that this would be similar to the Supplier of Last Resort process used in the U.K.

The Office of Public Utility Counsel suggested changing the Provider of Last Resort ("POLR") rate for residential and small commercial customers from an index of the Electric Reliability Council of Texas ("ERCOT") Real-Time Settlement Point Prices ("RTSPP") to, "a flat-rate, affordable plan without fluctuating energy or ancillary service components."

"OPUC strongly believes that the POLR rate should be a flat rate for residential customers (price per kilowatt-hours ('kWh')) and a flat rate energy charge with Transmission and Distribution Service Provider ('TDSP') charges passed through for small commercial customers. OPUC believes the POLR should also be an affordable rate plan, with no surprises, that consumers can switch away from without penalty. When a customer's REP goes out of business suddenly, customers may not be prepared to immediately select another REP. If customers are subsequently placed on a high-rate plan or a plan that can fluctuate with ERCOT energy or ancillary service prices, it can result in a very high bill for the customer. It may also cause additional and unnecessary customer confusion. Therefore, for residential customers, OPUC recommends the POLR rate be a flat-rate, affordable plan and recommends removing the index to the RTSPP," OPUC said

Texas Legal Services Center said that its long-standing proposal for a "standard retail service package" would serve as, "an appropriate substitute for the current POLR rate formula."

The Steering Committee of Cities Served by Oncor (OCSC) suggested that the PUC set a specific kWh rate for POLR service each quarter, but allow REPs to recover via uplift any unrecovered costs

"OCSC believes that an equitable approach to POLR pricing moving forward would be for the Commission to establish a periodic POLR rate for a specific price (i.e., to actually set the rate at a specific cents per kWh) on a periodic basis (for example, quarterly), and allow POLRs to seek additional, uplifted recovery upon a showing at the Commission, should that price prove to be insufficient due to price spikes or other unusual events during the period. Such an approach would remove the volatility from the POLR rate formula that events like Winter Storm Uri can produce, while allowing REPs to be made whole for their provision of POLR service in the event of extraordinary wholesale market conditions. OCSC feels strongly that POLR customers should be protected from the most extreme pricing risks through a continual process of Commission pricing review and updates. OCSC believes that such an approach would be equitable to both REPs and to retail customers, but acknowledges that this approach would require additional details about the process to be developed," OCSC said

The Alliance for Retail Markets said that, "If the RTSPP were to be removed from the POLR rate formulas, the Commission should take into account the risk considerations entailed in providing POLR service, the role of prepaid service in relation to POLR service, and impacts on communications to customers."

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