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Texas REPs Oppose Changing Definition Of Fixed Rate To Include Ancillary Service Charges

Consumer Advocates Ask Texas PUC TO Ban All Index Products For Residential Customers

REPs Oppose Proposal For New Signed Risk Statement For Index Products Which Aren't Tied To Wholesale Market

Consumer Advocates Seek Prohibition On Contracts Which Waive Customer Protections

Texas REPs Propose Removing Requirement To Direct Customers To Power To Choose On Bills, Replace With Broader Power To Save Site

July 7, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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Texas stakeholders filed with the Texas PUC comments on a strawman containing proposed rule changes to implement HB 16, which generally bans wholesale energy market index plans to mass market customers, and relevant portions of SB 3. The strawman also includes new customer protection changes not mandated by statute.

See more details on the strawman proposal here

As first reported by, the strawman proposes that the term fixed rate product shall be defined as, "A retail electric product with a term of at least three months for which the price (including recurring charges and ancillary service charges) for each billing period of the contract term is the same throughout the contract term, except that the price may vary from the disclosed amount solely to reflect actual changes in the Transmission and Distribution Utility (TDU) charges, changes to the Electric Reliability Council of Texas (ERCOT) or Texas Regional Entity administrative fees charged to loads or changes resulting from federal, state or local laws that impose new or modified fees or costs on a REP that are beyond the REP’s control."

In separately filed comments, the Texas Energy Association for Marketers and Alliance for Retail Markets each opposed the strawman's proposal to include ancillary service charges within the price of a fixed rate product which cannot change.

TEAM said that, "what constitutes ancillary services has been, and appears to continue to be, in flux at the Commission. Should ERCOT create a new category of cost or fee beyond the REPs' control, the REPs should not be prohibited from passing that charge through simply because it was given a label as an ancillary service."

ARM cited, "an important conceptual distinction with respect to ancillary service charges between ancillary service prices and ancillary service quantities."

"While REPs have some limited ability to hedge against ancillary service price changes, REPs cannot hedge against unexpected and unpredictable changes in the quantity of ancillary services procured by ERCOT. For example, ERCOT recently announced their intention to increase ancillary service procurements going forward and to only provide updates to the ancillary service quantities on the 20th of the preceding month. These incremental ancillary service quantities will drive additional costs that could not have been anticipated by REPs when establishing current customer contract pricing, and are more akin to changes in law that impose new fees or costs on a REP that are beyond the REP's control," ARM said

TEAM also opposed the strawman's proposed change to the definition of price

As previously reported, the strawman would also add ancillary services as a component under the definition of "price" which would now be defined as, "The cost for a retail electric product that includes all recurring charges, including ancillary services, excluding state and local sales taxes, and reimbursement for the state miscellaneous gross receipts tax."

As previously reported, the strawman would require a new Acknowledgement of Risk (AOR) to be "signed" by the customer for all indexed products (not just Wholesale Indexed Products as required by statute), and also for any product for which ancillary service costs are a pass-through

ARM and TEAM each opposed this proposal

ARM stated, "The Legislature could have required a signed AOR for indexed products other than wholesale indexed products, but it did not and focused its attention on the subset of indexed products (i.e., wholesale indexed products) then offered by some REPs to residential and small commercial customers that carried the highest risk of price volatility. ARM therefore recommends that the Commission limit the requirement to obtain a signed AOR to wholesale index products (which may only be offered to customers other than residential or small commercial customers), and that those provisions be moved to a new rule in § 25.499. Furthermore, it should be noted that REPs are already required to provide a reasonable range of pricing outcomes in the EFL for an indexed rate product, so customers are made aware of the potential for variability in other types of indexed products."

In contrast, Texas Legal Services Center urged the PUC to prohibit any form of index product for residential customers

"TLSC opposes the sale of indexed products to residential customers and asks the Commission to prohibit their sale to residential consumers," TLSC said, adding that, "We ask the commission to use its authority to protect low income and residential consumers from the potential harm of these high risk electricity products."

To the extent the PUC allows such products, TLSC said that an Acknowledgement of Risk should be required, but proposed "more direct" language concerning the risk

Specifically, TLSC proposed the following AOR for residential index products: "I understand that an indexed rate is a high risk choice. Under this plan prices can increase to any amount and they can be very high."

Addressing other rule provisions, ARM proposed modifying the requirement under § 25.479(c) that REPs must, on the first page of a residential customer's bill, include a reference to, such that the reference would instead be to the PUC's broader Power to Save website

ARM noted that the Power to Choose provision originated with a provision from PURA § 39.116, which expired on September 1, 2011.

"ARM recommends that this subsection be amended to require customer bills to include a reference to the Commission's website instead of because it provides more holistic recommendations and resources for customers to reduce consumption for savings, and also includes links to, ERCOT grid conditions, and other valuable resources," ARM said

Texas Legal Services Center in its comments reiterated its long-standing position that the PUC should require REPs to offer a "standard retail service package."

TLSC said that the rules should provide that contracts must not purport to waive statutory or regulatory customer protection requirements

TLSC also sought to prohibit REPs from charging fees not reflected in the average kWh rate (e.g. non-recurring fees)

"REPs have increasingly added new fees for residential customers to pay on top of the discretionary service fees charged by the TDU, municipally owned utility, or electric cooperative that are passed through to the customer. We recommend the following ... 'A REP may not impose fees in addition to the discretionary service fees charged by the TDU, municipally owned utility, or electric cooperative,'" TLSC said

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