Texas Staff Recommend Commission Be Granted Authority to Conduct Background Checks, Assess Fees on Retail Providers; Suggest Ending RPS

A draft from Staff of the Public Utility Commission of Texas for the 2013 Report on the Scope of Competition in Electric Markets recommends that lawmakers give the Commission authority to perform background checks on retail electric providers and to assess appropriate fees to cover such costs, and also suggests ending the goal for renewable energy.

Staff's recommendation notes that PURA and the Government Code do not expressly authorize the Commission to perform background checks on applicants seeking to become retail electric providers. The Commission currently performs a review of such applicants but does not perform formal background checks on them prior to authorizing them to become retail electric providers.

"Because there are important public interest considerations in ensuring that a retail electric provider is capable of providing the requisite service in times of stress on the electric grid, the Commission seeks the authority to perform background checks on such applicants, and the authority to assess a fee on such applicants to recover the cost of such background checks," Staff's draft provides.

"The PUC recommends that the Legislature authorize the Commission to obtain background checks, and to assess fees on applicants seeking to become retail electric providers in Texas for the cost of performing background checks on such applicants. The PUC also recommends that the amount of such fees be appropriated to the Commission for the sole purpose of conducting such background checks," the draft provides.

Staff's draft also recommends that the legislature should consider the repeal of the renewable energy mandate, imposed on REPs, at PURA § 39.904(a). Subsection (a) mandates the installation of 5,880 megawatts of renewable energy by 2015, and the mandate was met in 2008.

"While the Commission believes the renewable energy credits trading program is needed for retail electric providers to validate renewable energy marketing claims, the Commission believes the 5,880 megawatts mandate in Subsection (a) is no longer necessary," Staff's draft provides.

Additionally, Staff's draft recommends that the requirement at PURA § 39.9044 to develop a credit trading system to support development of natural gas-fired generation, which has never been triggered and is not expected to be triggered in the future, be repealed. "Because natural gas has been the most commonly built new generation for Texas for many years and it is expected to continue to be, there is no need to establish incentives for natural gas generation," Staff said.

Staff's draft also recommends changes to certain charges currently assessed to REPs on behalf of the customers they serve.

First, Staff recommended that the Commission be given authority to securitize the $7 billion investment in Competitive Renewable Energy Zones (CREZ), the costs of which flow to the REPs via transmission cost recovery factors. PURA § 36.401 allows securitization of certain non-CREZ costs, and securitized debt significantly lowers the carrying costs of a recoverable amount, Staff said.

Additionally, Staff suggested that the legislature may want to provide clear direction to the Commission if lawmakers desire that the System Benefit Fund (SBF) fee be an equal charge applied to all customer classes.

Currently, the fee varies by customer classes, to adjust for various voltage level losses applicable to each customer class

PURA § 39.903(b) specifies that the System Benefit Fund (SBF) fee cannot exceed 65 cents per megawatt hour. However the Texas Administrative Code § 25-451(d)(3) specifies that the average SBF fee may not exceed 65 cents per megawatt hour.

In setting the SBF, the PUCT has relied on its ratemaking authority to adjust the SBF to take voltage differences into account, and some customer classes are charged an SBF fee that is slightly below the statutory maximum of 65 cents per megawatt hour established in PURA while other customer classes are charged slightly above.

Project: 40372