Texas Staff Propose Additional Test to Determine if Fixed Price Prepay Product Exceeds POLR Rate

Staff of the Public Utility Commission of Texas have proposed an additional test to determine whether prepaid electric service sold to residential customers is less than the price charged by the Provider of Last Resort, in a draft proposal for adoption (Project 39969).

The draft proposal for adoption maintains, with some clarification, the three originally proposed tests to determine whether prepaid electric service sold to residential customers is less than the price charged by the Provider of Last Resort, as is required by the PURA §39.107(g).

However, Staff agreed with retail electric providers that a fourth test should be established by which a REP offering a fixed-rate prepaid plan could ensure compliance with the requirement that the prepaid rate be lower than the applicable POLR rate. REPs had said such a test is needed if market (and thus POLR) prices fall below where the REP locked-in the fixed rate.

"The fourth test recognizes the unique difficulty presented by a fixed-rate prepaid product since a REP may have considerable difficulty ensuring that the product both provides a fixed-rate to the customer and does not exceed a variable POLR rate over the term of the contract. The commission agrees with the REP Coalition that the determination of the POLR rate should be made at the time of the REP's offer for a fixed term contract," Staff's draft preamble states.

"However, the commission limits this option for complying with PURA §39.107(g) to situations where the customer accepts the offer within 30 days. Otherwise, a REP could post a standing offer before a period of declining POLR prices that could be accepted months if not years after the offer was posted, thereby defeating the purpose of PURA §39.107(g)," Staff's draft preamble continues.

Staff's specific recommended language for the four tests used to determine whether prepaid electric service sold to residential customers is less than the price charged by the Provider of Last Resort is as follows:

"The price for prepaid service to a residential customer calculated as required by §25.475(g)(2)(A)-(E) of this title shall be equal to or lower than at least one of the tests described in subparagraphs (A) - (C) of this paragraph:

"(A) The minimum POLR rate for the residential customer class at the 500 kilowatt-hour (kWh), 1,000 kWh, and 2,000 kWh usage levels as shown on the POLR EFL posted on the commission's website for the applicable TDU service territory. When an updated POLR EFL is posted on the commission's website, the REP, at the REP's option, may continue to reference the prior POLR EFL to ensure compliance with this paragraph for prepaid service prices charged during the first 30 days, beginning the date that the updated POLR EFL is posted.

"(B) The maximum POLR rate for the residential customer class calculated pursuant to §25.43(l) of this title (relating to Provider of Last Resort (POLR)).

"(C) The average POLR rate for the residential customer class at the 500 kWh, 1,000 kWh, and 2,000 kWh usage levels using the formula described in §25.43(l) of this title for the applicable TDU service territory, with the LSP energy charge calculated as the simple average of the RTSPPs over the prior month for the load zone located partially or wholly in the customer's TDU service territory that had the highest simple average price. For prepaid service prices charged by a REP up to and including the tenth business day of a month, the test may be met by using the average POLR rate calculation for the month preceding the prior month.

"(D) For a fixed rate product, the REP must show that the prepaid service prices calculated under §25.475(g)(2)(A), (D) – (E) of this title are equal to or lower than one of the tests described in subparagraphs (A) and (C) of this paragraph at the time the REP makes the offer and provided that the customer accepts the offer within 30 days.

The draft proposal for adoption would not require a REP to annually select which test it would use to determine if prepaid service rates are lower than the POLR rate, as sought by consumer representatives.

The proposal for adoption also updates the POLR rate calculation to reflect the current practices and changes in terminology associated with the move to a nodal market in ERCOT.

The draft disagrees with consumer representatives that the Large Service Provider energy charge should be based on the simple average of all Real-Time Settlement Point Prices (RTSPPs), rather than simple average of only the RTSPPs for the load zone partially or wholly in the customer's TDU service territory that had the highest simple average.

The consumer representatives' sought use of a simple average, "may result in below cost POLR rates and could adversely affect the competitive market rates," the draft states.