Update: Texas Retail Provider Says PUC Should Require REPs To Provide Advance Monthly Notice Of New Rates To All Variable Rate Customers (Not Only Roll-over Customers)

September 7, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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In reply comments to the Texas PUC in a customer protection rulemaking implementing various recent legislation, Evolve Retail Energy LLC d/b/a Octopus Energy said that the PUC should require REPs provide, on a monthly basis, clear notice of the price applicable for the month before that product goes into effect for a customer each month.

As previously reported (see story here), Octopus Energy has already made such recommendation for customers on a REP's default renewal product.

Among other things, the rulemaking proceeding is addressing proposed revisions to §25.475 reflect the timing and content of the notice that a REP must provide pursuant to Utilities Code §39.112 as enacted by HB 16. The notice would not require a specific rate disclosure for the situation in which the customer does not take any action and rolls over to a default renewal product

See background on the proceeding here

In reply comments, Octopus Energy further said, "Octopus Energy recommends that the Commission make this [Octopus's proposed] price disclosure a requirement for any variable price product sold to residential and small commercial customers, as well as customers who rolled onto such a product prior to the effective date of HB 16."

"By their nature, these products have rates that can change on a monthly basis. This additional price clarity will ensure that customers have a better understanding of what they will pay for their service the next month," Octopus said in the reply comments

While Octopus was not explicit in its comments on the form of notice, an attendant blog posts suggests email notification would be required. Under the current rules, REPs must provide, via their website and a toll-free number, the "current" variable rate for a plan (as well as historical prices). Octopus's blog post cites both its proposal to require the future variable rate disclosure for default renewal products, but also variable rate transparency more generally.

"As a steadfast, customer-focused energy provider, we’re asking the Public Utilities Commission of Texas to clarify HB16 legislation that would require that any person on a variable rate be notified ahead of time of a change so they can make more informed decisions," Octopus said in the blog post

"What exactly are we asking for in terms of notification? We believe that legislation should mandate notification via email several days in advance of a rate change on a variable energy product. If you’re on a monthly variable rate, this means you’d receive a notification every month before your rate changes, allowing you the opportunity to change energy providers or products as needed," Octopus said in the blog post

"Texas energy consumers deserve transparency regarding their energy bills; a rather simple and direct ask of energy suppliers in the state. However, there are large discrepancies between notification requirements when it comes to variable versus fixed-rate energy products. Often, consumers are presented with variable rates that can be twice as much as fixed rates," Octopus said in the blog post

"Why are we doing this? First, it’s an incredibly low cost lift for energy suppliers that provides an extremely high value to customers. It’s consumer protection at its core: providing the consumer with necessary information so that they can make informed decisions about their energy. Unfortunately, many suppliers have crafted entire business models around the idea that customers will forget that they are on variable rate products and take gross advantage by not notifying customers when the rate changes. This allows energy providers to hike up energy rates, and they are counting on customers to not notice. It’s how they make the most money and secure their bottom line without providing any real additional value. As a result, energy consumers are potentially overpaying significant amounts for their energy just because of lack of transparency," Octopus said in the blog post

"In a recent survey we conducted across Texas, 84 percent of respondents said it’s important for their electricity supplier to provide regular, transparent updates about any rate changes. Almost one-third of respondents said they would even switch providers if they knew they’d be joining a service that properly notifies them of any rate changes. Variable-rate energy products represent larger segments of the market share within energy; precisely why customers should receive information about them in real time. Such legislation would encourage more innovation within the energy market as energy providers are pushed to think more creatively about what products they offer their customers. No one should be overpaying for energy, especially as a result of sneaky price hikes that they didn’t know about. Transparency in energy pricing is necessary and simply the right thing to do," Octopus said in the blog post

In reply comments to Octopus's original proposal limited to default renewal products, the Joint REPs said, "This proposal is unnecessary, impractical, and goes beyond the statutory requirements of H.B. 16, which added subsection (h) to PURA § 39.112 and requires only that the REP 'automatically serve the customer through a default renewal product that the customer may cancel at any time without a fee...' and that it must be 'a month-to-month product in which the price the customer pays for electricity may vary between billing cycles;' and 'based on clear terms designed to be easily understood by the average customer.' No such additional monthly notice requirement was required by the Legislature in this instance and the Commission should decline to add such a provision here."

The Joint REPs consisted of ARM, TEAM, and the Coalition of Competitive Retail Electric Providers

The Joint REPs said, "Such notice is also not necessary based on REPs' existing obligations to provide customers notice of the price. Because H.B. 16 requires that the default renewal product be a month-to-month product, it must be either a variable or an indexed product. If it is an indexed product, then § 25.475(g)(2)(F) requires that the EFL disclose a website and phone number that the customer may use to obtain the current price. If it is a variable product, then REPs are required by § 25.475(c)(2)(G) to disclose on their website and via a toll-free number the current price of the product. The EFL for a variable price product must also disclose how the customer can obtain the current price (§ 25.475(c)(2)(G)) and each bill must include a statement informing the customer how to obtain information about the price that will apply on the next bill (§ 25.475(d)(2))."

"The default renewal product's price cannot be practically known until close to the end of the contract when the REP will have some sense for (1) how many customers have not selected another renewal product or switched away; (2) what wholesale energy and ancillary service market conditions and prices are; and (3) what TDU rates are. Similarly, the actual price paid by the customer cannot be determined until after the customer's actual usage for a given month is known (i.e., customer charges, meter charges, demand charges, usage-based credits, and other 'blocky' price components result in an actual price that varies as these inputs are amortized across a customer' s monthly usage). The Legislature recognized this dynamic in H.B. 16 by only requiring that the default renewal pricing terms be disclosed in the final contract expiration notice (see PURA § 39.112(f)). The Commission should therefore decline to incorporate Octopus Energy's impractical proposals to expand upon the statutory requirement by requiring monthly default renewal pricing and 'actual price' notification 24 to 72 hours before the rate becomes applicable," the Joint REPs said

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