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Texas Retail Providers Say Proposed Ceiling On POLR Rates Would Have Resulted In POLRs, Prepaid Providers Facing Below-Market Rate 40% Of The Year In Past 12 Months

October 6, 2022

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Copyright 2010-21
Reporting by Paul Ring •

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Texas retail electric providers raised concerns with the proposed level of a price ceiling on rates for non-volunteer POLRs (Large Service Providers, or LSPs) contained in a proposal for publication

As previously reported, for residential service, the LSP POLR rate would be determined using the existing formula, but with changes to the customer charge and energy charge as follows:

• LSP customer charge must be $0.09 (increased from $0.06 per kWh)

• Beginning on the 1st of each month, the LSP energy charge must be the average of the actual Real-Time Settlement Point Prices (RTSPPs) for the applicable load zone for the 30-day period ending on the 20th day of the preceding calendar month (the historical average RTSPP) multiplied by the number of kWhs the customer used during that billing period and further multiplied by 120%. The applicable load zone will be the load zone located partially or wholly in the customer’s TDU service territory with the highest average under the historical average RTSPP calculation.

• The LSP energy charge must not exceed 140% of the preceding month’s LSP energy charge multiplied by the cap adjustment factor. The value of the cap adjustment factor is set to 1.0 every calendar year. At any time commission staff can file a recommendation for the commission to set a different cap adjustment factor. A LSP offering POLR service must declare the cap adjustment factor on the EFL

The LSP rate also serves as a rate cap for prepaid service

The Alliance for Retail Markets (ARM) and Texas Energy Association for Marketers (TEAM) (collectively the REP Coalition) noted that the proposal includes an energy charge ceiling of 140% of the preceding month’s LSP energy charge multiplied by the cap adjustment factor.

"The REP Coalition does not disagree with this proposal; however, a cap of 160% would provide additional security against the energy charge doubling without placing an inordinate amount of risk on the LSP providing that rate," the REPs said

The REPs said that, "Over the last year a 140% ceiling would have been hit five times, while a 160% ceiling would have been reached only once. Stated another way, under the PFP’s proposed 140% cap, an LSP could face having a POLR rate that is under market approximately 40% of the year."

"Similarly, REPs offering prepaid service could have their rate capped below market approximately 40% of the year," the REPs noted

"Accordingly, the REP Coalition respectfully requests that the Commission adopt a higher ceiling in the Proposal for Adoption. Raising this cap may also eliminate the need for a cap adjustment factor," the REPs said

While, as previously reported, the LSP price formula does include a cap adjustment factor, REPs were concerned with timely implementation, and suggested the higher 160% percentage ceiling would be more efficient

"While the ability to adjust the cap is appreciated, the REP Coalition recommends that the adjustment factor is not necessary given other proposed changes to the rule that represent a more straightforward means to address such concerns without introducing additional complexity into the formula," the REPs said

"If the Commission prefers to implement a cap adjustment factor, the REP Coalition has some concerns that the adjustment mechanism as proposed may prove too time intensive and unwieldy for efficient use in the severe circumstances in which a cap adjustment would most likely become necessary. Circumstances are often dynamic in the brief time that precedes a mass transition of customers and a method that requires a recommendation filing by Commission Staff followed by Commission consideration and approval during a posted open meeting may require more time than is possible in such fast-moving circumstances," the REPs said

The REP Coalition recommended that if the cap adjustment factor is to be practicable, authority to adjust the cap should be delegated to the Executive Director, "who is best placed to make the expedient decisions that severe circumstances may require[.]"

The REP Coalition raised the same concern with small & medium non-residential pricing, which uses a similar 140% ceiling and adjustable cap factor

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