For Approving Merger of AEP Texas Companies, Texas Staff Recommend PUC Adopt Condition Requiring Rebate That Must Be Passed Through Retail Electric Providers To End-Use Customer For Performance Metric

Staff of the Public Utility Commission of Texas have proposed that, as a condition of approving the merger of AEP Texas Central and AEP Texas North, the PUCT impose a performance standard on the merged TDU, with rebates required for failure to meet this performance standard required to be rebated through retail electric providers to end-use customers.

As previously reported (click here for story), while the AEP Texas TDUs proposed to merge, the companies said that there would be no impact on REPs from the merger, as the TDUs are not seeking to implement uniform, system-wide rates at this time, and backoffice market processes would also not change.

However, PUCT Staff is proposing a potential refund credit to AEP Texas customers, if certain performance metrics are not met, that would be issued to REPs only if REPs pass on such credits to their end-use customers.

Staff is specifically proposing certain system-wide System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI) benchmarks, which would be a system-wide metric (and rebate), and not a per feeder metric (and therefore there would be no feeder-specific rebates)

To the extent such benchmarks are not met and customer rebates are required, Staff said that, "Rebates have to be processed through the Retail Electric Providers (REPs) that sell electricity to individual customers. The proposed system-wide rebate would be distributed on a per capita basis, would be the same value per meter, and would be passed through the REPs to all meters in AEP Texas distribution system without having to identify individual meters and varying rebate amounts."

Citing precedent for such mandatory pass-through of rebates by REPs to customers, Staff noted that, "In Docket Nos. 34077 (The merger of Texas Energy Future Holdings and Oncor) and 30172 (The combination of PNM Resources and TNP Enterprises, Inc.), the Commission ordered the utilities to file compliance plans that ensured that the rebates required by the Performance Standards would be provided to the retail, end-use customers."

Staff recommend that such a compliance plan be developed by AEP Texas, if the proposed transaction is approved.

Docket 46050