Texas Staff: Sharyland TCRF Allocation Changes Should Be Approved, But Not Effective Until

Staff of the Public Utility Commission of Texas support changes in the Transmission Cost Recovery Factor allocation methodology proposed by Sharyland Utilities, LP, which would have the effect of mitigating some residential rate burden, but, in their primary recommendation, do not support a date earlier than the standard March 1, 2016 date for any change in the TCRF rates applicable to REPs.

"Any change to the allocation factors should be applied on a prospective basis in Sharyland's next TCRF update to be filed December 1, 2015, and effective March 1, 2016. The procedural timeline for TCRF updates as implemented in 16 TAC 25.193(b)(1) serves to benefit ratepayers. Departures from the timeline would increase costs for retail electric providers (REPs) and ultimately be detrimental to ratepayers across ERCOT," Staff said

"REPs incur costs to implement rate changes. While these costs will vary by REP, and competitive market pressures will provide incentives to minimize these costs, these costs may ultimately be passed on to consumers. All REPs may not be able to immediately increase rates on all customers to recover the costs and restore their operating margins. In addition, applying new TCRF rates prior to March 1, 2016 would occur on a timeline different than the normal TCRF update schedule set out in 16 TAC 25.193(b)(1). Acting outside of the schedule in the rule could cause regulatory uncertainty for REPs, and this uncertainty could result in increased costs for REPs to address further potential changes going forward. This potential for higher costs going forward is likely to be incorporated into expectations for all REPs, and subsequently reflected in REP offers reflecting rates that are higher than they otherwise would be," Staff said

Staff said that to the extent the new allocation factors are desired to be implemented before March 1, 2016, the best way to implement the new allocation factors would be via the normal class true-up mechanism as set out in 16 TAC § 25.193(b)(2)(B)(iii). Under this proposal, the Commission would implement the new TCRF allocation factors on a future date prior to March 1, 2016, but the rates would be applied at the next TCRF update and adjusted through the true-up adjustment for the current TCRF collection period. While it would not result in a change to TCRF rates until March 1, 2016, this would appropriately credit or charge ratepayers for any changes due to the allocation factor revision, Staff explained

However, if the Commission wishes to implement new TCRF rates before March 1, 2016, the best time to implement the change would be at the beginning of a month and in conjunction with a rate change for any other utility, Staff alternatively said, suggesting that the modified TCRF rates be implemented under this alternative on December 1, 2015, noting a change in CenterPoint Energy Houston Electric rates which occurs then. Such modified TCRF rates would only apply prospectively from December 1, Staff said. Staff noted that a December 1 date would occur before Sharyland's winter peak.

Finally, to the extent the Commission wishes to make the new TCRF allocation factors applicable back to September 1, 2015 (that last TCRF rate change), Staff said that the Commission should not require Sharyland to calculate, and the REPs to apply, a separate set of refunds or surcharges to the bills between September 1 and December 1.

"Instead, the Commission should direct Sharyland to implement revised TCRF rates effective December 1, 2015 in the manner discussed above, and to apply the revised allocation factors to the months of September 2015 through November 2015 via the normal class true-up mechanism in the TCRF rule for the March 1, 2016 and September 1, 2016 TCRF updates, as discussed previously. This approach would allow for timelier rate modification, while mitigating the potential for controversy and higher rate case expenses in applying the allocation factor adjustment back to September 1, 2015," Staff said

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