Texas Staff Agree With REPs' Sought Change To Cap Imposed On Changes In POLR Rates -- EnergyChoiceMatters.com

Texas Staff Agree With REPs' Sought Change To Cap Imposed On Changes In POLR Rates

November 1, 2022

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Reporting by Paul Ring • ring@energychoicematters.com

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Staff of the Texas PUC have filed a draft proposal for adoption for revisions to the Provider of Last Resort pricing formula for non-volunteer POLRs (Large Service Providers or LSPs)

Staff have proposed to adopt a change proposed by REPs and proposed to revise language, from the proposal for publication, such that a cap on LSP rate changes each month would be 160%, rather than 140% as originally proposed, for residential and small & medium non-residential customers

As previously reported, REPs had said that, under the lower 140% cap, an LSP could face having a POLR rate that is under market approximately 40% of the year, citing prior pricing data (see story here).

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

Under Staff's draft proposal for publication, the LSP energy charge would be governed by the following:

• For residential customers: Beginning on the 10th of each month, an LSP energy charge must be the average of the actual Real-Time Settlement Point Prices (RTSPPs) for the applicable load zone for 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 LSP energy charge must not exceed 160% of the preceding calendar month’s LSP energy charge.
• For small and medium non-residential customers: Beginning on the 10th of each month, LSP energy charge must be the average of the actual RTSPPs for the applicable load zone for the preceding calendar month multiplied by the number of kWhs the customer used during that billing period and further multiplied by 125%. The LSP energy charge must not exceed 160% of the preceding calendar month’s LSP energy charge.

With this change, Staff proposes to delete a proposed "adjustment factor" to the LSP rates, as increasing the monthly cap to 160% addresses the concerns intended to be addressed by the adjustment cap

"Increasing the cap to 160% will allow the LSP POLR rate to more frequently remain above market rates without an adjustment factor. Removing the adjustment factor will also reduce the complexity of administering the formula," Staff said in a draft preamble

In a draft preamble, Staff further discusses this change thusly: "The commission agrees with the REP Coalition that the LSP POLR rate should be slightly above market rates to account for the additional risk that LSPs face in terms of potentially having to assume a large number of unexpected customers after a mass transition to POLR event. The commission also agrees that the LSP POLR rate being capped below market rates has the additional consequence of capping the rate for prepaid service below market rates. Accordingly, the commission modifies the rule to increase the cap on how much the residential LSP energy charge can increase each month from 140 percent to 160 percent. This will allow the monthly LSP POLR rate to adjust more quickly in response to actual market conditions while still providing customers with protection against the significant price spikes that a monthly formula could produce following events such as Winter Storm Uri."

For the small and medium non-residential customer classes, Staff proposes to adopt a change proposed by REPs, by increasing the LSP customer charge to $0.09, versus the previously proposed $0.025 per kWh. With this change, Staff also would remove the LSP demand charge for the small and medium non-residential customer classes

The proposed rule would allow, "On a showing of good cause by an affected person, the commission may direct an LSP to adjust the rate prescribed by paragraph (2) of this subsection [the LSP rate formula], if necessary to ensure that the rate is consistent with prevailing market conditions."

Since the LSP rate serves as a cap on prepaid service, REPs had suggested adding language stating that the PUC could direct, for good cause, that the LSP rate may be changed to ensure that, for "any REP with products subject to the calculation(s)", the LSP rate is sufficient to recover the costs of providing service to applicable customers. REPs further expressed concern that a prepaid REP, not serving as an LSP but subject to the LSP rate as a price cap, may not have cost information concerning the LSP's service to properly seek a good cause change in the LSP rate, thus proposing the expanded language above

Staff's use of the term "prevailing market conditions" in the above-quoted text -- a revision from the proposal for publication -- is meant to address REPs' concerns in this matter

However, Staff would decline to more broadly state that REPs are entitled to cost recovery

Staff's draft preamble states, "The commission declines to modify the standard for adjusting the LSP POLR rate to ensuring that the rate is sufficient to allow 'any REP with products subject to the calculation(s) under subsection (m) to recover its costs of providing service' as requested by the REP Coalition. REPs are not guaranteed cost recovery for any competitively-offered products, including prepaid products, and it would be inappropriate for the commission to consider and individual provider’s costs of providing a competitive product when setting the LSP POLR rate."

"However, the commission agrees with the REP Coalition that providers of prepaid service are subject to the LSP POLR rate cap but may not have access to the information required to support a good cause motion based on the proposed standard of 'if necessary to ensure that the rate is sufficient to allow an LSP to recover its costs of providing service.' Accordingly, the commission modifies the rule to provide that the commission may direct an LSP to adjust the LSP POLR rate if necessary to ensure the rate is consistent with prevailing market conditions. This modification will allow LSP POLR providers and providers of prepaid products to support claims that the LSP POLR rate needs to be adjusted," Staff said

Project No. 53820

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