Texas Staff Recommend Legislature Explicitly Provide Commission With Authority to Ban Companies, Individuals from Retail Market

In draft legislative recommendations for the 2015 scope of competition report, Staff of the Public Utility Commission of Texas have recommended that the legislature explicitly provide the Commission with authority to ban certain companies or individuals from participation in the retail market.

"[I]n the cases of especially egregious prior acts by applicants, or serious repeat offenders, it may be appropriate for the Legislature to specifically enumerate further requirements for certification and enforcement regarding applicants, REPs, and the individuals associated with them, including a temporary or permanent ban from doing business in the Texas retail electric market," Staff said.

"While certain principals of REPs that have exited the market after substantial violations of state law and PUC rules have voluntarily agreed to stay out of the market, the Commission's authority to require such an outcome in absence of an agreement may be challenged in the future without legislative clarification. Such extraordinary remedies would be accompanied with additional due process requirements," Staff said.

In other areas of interest to REPs, Staff recommended that the legislature grant the Commission authority to implement alternative, streamlined ratemaking approaches for distribution costs charged to REPs.

The legislature previously authorized streamlined recovery of distribution investments (implemented via the Distribution Cost Recovery Factor).

Notably, for utilities offering customer choice, the current alternative ratemaking statute requires that all non-fuel rates adjusted in a 12-month period that are charged by the utility to retail electric providers shall, "to the extent possible," be implemented simultaneously.

Current statute also requires that distribution utilities are required to provide notice to retail electric providers of the approved rates set through alternative ratemaking not later than the 45th day before the date the rates take effect

Under the current law, the Commission's alternative ratemaking authority expires in January 2017.

The Legislature may wish to extend this expiration date or, alternatively, grant to the Commission the authority to develop other, additional methods of streamlined recovery, Staff said.

"Certain language in Chapter 36 of the Utilities Code could be construed as preventing the Commission from adopting alternative ratemaking methods even if the Commission were to find that they provided comparable oversight of utilities in a more efficient manner. The Legislature could grant the Commission broad authority to adopt these streamlined or alternative ratemaking structures if the Commission found it was in the public interest to do so," Staff said.

Staff also recommended that the legislature authorize the Commission to review whether new DC ties between ERCOT and other interconnects are in the public interest.

"The interconnection of new large DC ties between the ERCOT system and neighboring regional transmission organizations could have a significant impact on price formation, resource dispatch practices, reliability, and resource adequacy. During times of system stress and high prices, ERCOT could use the DC ties as resources, importing power over the tie to alleviate strain on the system and moderate prices. When prices are low, exports over DC ties could provide broader markets for power producers in ERCOT. The impacts of new large DC ties on consumers and producers are varied and must be formally assessed," Staff said.

"Given this potentially significant impact on the ERCOT region, the Commission could be given the authority to review such DC ties and their impacts on the public interest, and set conditions for the interconnection of the DC tie to the ERCOT system, or deny such interconnection," Staff said.

Staff also noted that the 5,880-megawatt renewable energy mandate under PURA § 39.904 has been met, and is therefore no longer necessary. Staff noted that the renewable energy credits trading program is needed even if the renewable energy goal is eliminated in order for retail electric providers to validate renewable energy marketing claims.

Staff also recommended an extension on the life of the System Benefit Fund (SBF) to 2017 and authorization of a discount to spend the remaining fund balance of $247 million.