Texas REPs Seek Changes to Deposit Rules to Accommodate Offering of Demand Response Solutions

A coalition of Texas retail electric providers has told the Public Utility Commission of Texas that the Commission's deposit rules require modification to facilitate the offering of demand response products by retail electric providers.

Specifically, REPs said that the rules must: 1) allow REPs to charge a deposit sufficient to cover the costs of any device that facilitates demand response (DR) participation, including equipment installation and other related deployment costs, and 2) not preclude REPs from charging a "restocking fee" to customers enrolled in a DR product or service who vacate a premise at which demand response equipment or devices are installed prior to expiration of the contract.

Currently, Commission rules permit REPs to request a separate deposit for products other than electric service.

"That being said, customers may find the request of separate deposits for electric service and a demand response device cumbersome. In the course of designing retail products, REPs may discover that DR product adoption rates are higher if the cost of a DR device can be embedded in the cost of electric service," REPs said.

However, P.U.C. SUBST. R. 25.487(e) limits the amount of the total deposit for electric service to the greater of one-fifth of the customer's estimated annual billings or the sum of the estimated billings for the next two months. Some sophisticated DR products could include load control devices and telemetry functionality that considerably exceed the deposit cap, REPs said.

The REPs gave the example of a 1,000 kWh/month customer enrolled in a 12-month retail product priced at 10¢ per kWh. A deposit based on the one-fifth standard in P.U.C. SUBST. R. 25.487(e) would be approximately $240. However, if a REP embedded a $400 demand response device on top of the aforementioned ten-cent offer, the rate would be approximately 13.3 cents per kWh and warrant a $320 deposit. "The collection of an additional $80 would provide some security coverage, but it may not be sufficient to make offering this type of product financially tenable. REPs will not develop this type of product without the ability to protect an investment in the DR equipment in addition to recovering other costs associated with the provision of electric service," REPs said

"Therefore, the REP Group maintains that a higher deposit cap is warranted for products that include the cost of a DR offering within the cost of electric service."

"Second, the Commission could reduce the risk of stranded DR investments by not precluding REPs from charging a 'restocking fee' to customers that select a term product involving an investment in DR technology at the customer's premise, but subsequently move to a different premise or switch to a different product before the end of the contract term. Disclosure of this restocking fee would be clearly outlined in the terms of service documents and EFL, subject to current requirements in the Commission's rules. The ability to reduce the risk of stranded DR investment in this manner would significantly increase the incentive for REPs to offer this type of product and should result in greater levels of investment that would put DR devices and equipment in customers' homes and businesses," REPs said.

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