Staff Supports 80 MW Cap for Initial Competitive Generation Service Tariff at Entergy Texas

Participation in Entergy Texas Inc.'s competitive generation service (CGS) tariff should be capped at 80 MW, Staff of the Public Utility Commission of Texas said in a statement of position (38951).

See 1/12 story for background on the competitive generation service tariff

Under a stipulated list of facts agreed to by parties to the case, 80 MW represents the low end of the load proposed to be eligible under the competitive generation service tariff. The high end is proposed at 150 MW.

"Staff believes that the program should be capped at 80MW, which is the low end of the 80MW to 150MW range as agreed to by the parties, in keeping with the limited nature of a pilot program."

Texas Industrial Energy Consumers is seeking a 150 MW cap for participation on the competitive generation service tariff.

Furthermore, Staff said that only Large Industrial Power Service (LIPS) class customers should be eligible to participate in the program. "LIPS customers are generally more sophisticated customers with relatively large loads and are likely the only customers that can realistically participate in the CGS program at this time," Staff said.

Although there has been the suggestion by at least one party that smaller customers should be allowed to aggregate to take service under the competitive generation service tariff, "Staff believes that non-LIPS customers should not be allowed to aggregate their loads at this time in order to qualify for CGS service since the program is in essence a pilot program and should therefore initially be limited in scope."

Aside from the participation cap, the major contested issue is the definition of unrecovered costs to be collected by Entergy.

PURA permits a utility, "to recover any costs unrecovered as a result of," a competitive generation service tariff.

Entergy argues that the term unrecovered costs includes the test year fixed production costs that would be assigned to a customer in a base rate case if such customer had not switched to competitive generation service.

Staff and TIEC oppose classification of such amounts as unrecovered costs, arguing that the amounts represent lost revenues, and that the Commission and courts have excluded lost revenues from being considered costs under PURA.

Entergy argued that the revenues it is authorized to collect under its base rates, "are purely and simply the measure of its cost of service."

"[R]ates are designed that will allow ETI to recover from each of its customers that customer's share of the costs reflected in ETI's revenue requirement ... the Company's revenues are the same thing as its costs," Entergy said.

"When a customer who would otherwise provide reimbursement of those costs to ETI instead takes CGS service and thereby avoids contributing its share to the recovery of ETI's fixed production costs, those costs go 'unrecovered,'" Entergy said.

Entergy said that under current rates, unrecovered fixed production costs due to CGS customers, net of offsets (such as a fixed cost contribution fee to be paid by CGS customers) would be $2.643/kW/month.

Staff, however, said that the fixed production costs which CGS customers bypass are lost revenues, while the PURA CGS provision addresses only unrecovered "costs." "Staff believes that ETI's request ... would conflict with the principle established by the Commission and the Austin Court of Appeals on this issue because it is a request to recover lost revenues even though the applicable PURA provision addresses only costs, and should therefore be rejected."

Staff said that the only unrecovered costs that would result from the implementation of the CGS program would be ETI's initial implementation and ongoing administrative costs as well as ETI's costs of providing back-up power. Staff noted that the parties have agreed that CGS customers will pay for any such implementation and administrative costs, assuming participation in the program. Regarding ETI's back-up power costs, Staff noted the parties agreed that CGS customers should pay a Fixed Cost Contribution Fee and Unserved Energy Rate, which is intended to compensate ETI for its costs of providing back-up power to CGS customers. "The result is that ETI should not have any unrecovered costs," Staff said.

"Absent a specific statutory grant, a utility is not permitted, and should not be permitted, to charge customers for service it does not provide. Whether a customer reduces its load through conservation measures, through self-generation, or through procuring generation from an alternate source, a utility charges for the service it provides, not for the service it might have provided but for the load reduction. The Commission should not reverse course and allow ETI a lost revenues adjustment mechanism in this case," TIEC added.