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Twenty Texas Senators Tell PUC That Uplift Financing Proceeds Intended To Only Be Utilized, "To Prevent Unnecessary Uplift Charges Due To Defaults"; Also Say Netting Is Required

August 11, 2021

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

The following story is brought free of charge to readers by EC Infosystems, the exclusive EDI provider of EnergyChoiceMatters.com

Twenty Texas State Senators, including Senators Charles Schwertner and Kelly Hancock, have filed a letter with the Texas PUC explaining their position that the legislative intent of HB 4492 is that netting is required in establishing proceeds to be provided to LSEs under the "uplift" financing process

The Senators further said that the Senate's intent is that, "any securitized funds are only utilized to prevent unnecessary uplift charges due to defaults."

Hancock was the Senate sponsor of HB 4492

HB 4492 creates a program to finance, and provide funds to LSEs, Reliability Deployment Price Adder ("RDPA") charges and Ancillary Service costs above the Commission's system-wide offer cap for the period beginning 12:01 a.m., February 12, 2021, and ending 11:59 p.m., February 20, 2021 (known as "uplift")

As previously reported (see details here), the PUC has sought briefing on whether the bill requires offsetting the amounts paid in excess of the Commission's system-wide offer cap by amounts received in excess of the Commission's system-wide offer cap, and, if not, does this offset include amounts received by entities affiliated with the entity that made such payments. Key to this question is the phrase in the statute, "exposed to the costs included in the uplift."

As previously reported by EnergyChoiceMatters.com, Texas State Representative Chris Paddie sent a letter to the Texas PUC stating his opinion that HB 4492 does not authorize any "netting" of an LSE's costs under the program against any affiliate or other company

The Senators wrote, "In response to the letter sent from the House, this letter is meant to provide additional clarity regarding the Senate's legislative intent to use netting when executing the debt obligation order."

The Senators wrote that, "To ensure this relief is ultimately distributed in the most appropriate manner, HB 4492 requires the PUC to establish a documentation process for entities to demonstrate their exposure to ancillary service costs and Reliability Deployment Price Adder (RDPA) charges included in the uplift balance. The legislation further stipulates that this documentation should include any proceeds received for these same purposes."

"Based on a calculation by the Independent Market Monitor (IMM), the Texas Legislature placed a limit of $2.1 billion on the amount available for securitization financing; an amount that was estimated to cover the total exposure to ancillary service costs and RDPA charges of each affected entity after considering their consolidated corporate umbrella. Without considering the financial impact of these offsets, the total cost of the uplift balance would far exceed the $2.1 billion cap set by the Legislature and hinder ERCOT's ability to efficiently distribute this relief in a manner consistent with the requirements in HB 4492 that reduces the risk of additional defaults, supports the financial integrity of the wholesale market, and is necessary to protect the public interest, most importantly, Texas ratepayers," the Senators wrote

"In summary, HB 4492 and the Senate's legislative intent, stipulates that netting is required to ensure the overall monetary situation for each company and its affiliates is considered and any securitized funds are only utilized to prevent unnecessary uplift charges due to defaults. We stress that the PUC should strongly reference the bill and the Senate's legislative intent in their methodology development in implementing HB 4492," the Senators wrote

Docket 52322

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