Texas PUC Staff: Shopping For Lowest Priced Offer Could Offset Nearly All of Sharyland Distribution Rate Increase

While residential customers at Sharyland Utilities, LP have faced higher transmission and distribution charges for a variety of reasons, if customers selected the lowest priced offer from a retail electric provider, they could offset the majority of those T&D increases, reflecting rate competition among REPs, Staff of the Public Utility Commission of Texas noted in a report on the factors and historical background underlying the rates of Sharyland Utilities.

Staff noted that the total rate of 11.1 cents per kWh for residential customers at Sharyland Utilities prior to the start of competition in May 2014, "is not significantly different from the lowest REP offer recently available of 11.7 cents."

"Stated another way, for a residential customer with monthly usage of 1,000 kWh, the difference in costs would be $6 per month. This suggests that although the delivery-charge portion of a residential customer's bill has increased, the competitive market includes retail rate offers that can offset much of the effects of that increase," Staff noted

Staff reported on a variety of factors which drove Sharyland Utilities bills higher for residential customers, including a partial movement towards more cost-based rates that previously were heavily subsidized by other rate classes; changes to Sharyland Utilities' customer classifications to reflect the utility's switch from a fully "bundled" utility to a utility that provides only transmission and distribution service (with structures such as hand houses, barns, shops, and wells now billed under secondary service), and the expiration in December 2013 of Sharyland Utilities' favorable power contract with Southwestern Public Service Company. Regarding the expired SPS PPA, Staff noted that, although the unbundled power charges may have increased for some customers as a result of the transition to ERCOT, "it is important to note that they would have also increased had SU-CapRock remained in SPP and been forced to enter into a new contract in the SPP power market."

Sharyland Utilities customers' higher electricity usage versus other areas of the state was also cited by Staff as driving higher bills. "Compared to customers of other transmission and distribution utilities (TDUs) in the state, SU-CapRock's residential customers, on average, use significantly more electricity during the winter months, including during the winter of 2014-2015 (the time frame generally consistent with the timing of when the Commission began receiving complaints)," Staff said.

Issues driving Sharyland Utilities' distribution rates higher regardless of customer class include its small size and rural service area, which inhibit economies of scale.

Staff listed reasons why an earlier filing of a rate case for Sharyland Utilities may or may not be desirable. While an earlier filing would allow the Commission to address cost allocation among customer classes, an earlier filing may necessitate use of data that does not fully capture the growth (and costs of serving) growing customer classes (such as non-residential customers).

Moreover, "[g]iven Sharyland's significant increase in capital expenditures and additions to rate base since its last rate proceeding, and the possible inclusion of rates of Sharyland's $30 million cost deferral [related to the McAllen division which would be addressed since the next rate case would set system-wide rates], an overall rate increase is possible or even likely," Staff noted.

"In other words, a rate proceeding that is filed earlier than previously contemplated could result in an increase in overall rates sooner than would otherwise occur," Staff said

Docket 44592