AEP Texas Agrees To Withdraw Proposed New Inadvertent Gain Fee For Retail Electric Providers

Settlement Generally Adopts System-Wide Rates For AEP Texas, But Some Credits, Legacy Charges Remain Unique To Central, North Divisions

Various parties, including AEP Texas, Staff of the Public Utility Commission of Texas, the Office of Public Utility Counsel, Cities Served by AEP Texas, Texas Industrial Energy Consumers, the Alliance for Retail Markets (ARM), and Texas Energy Association for Marketers (TEAM) have filed a settlement in AEP Texas' rate case currently before the Texas PUC

Among the terms of the settlement is that AEP Texas agrees to withdraw its request for approval of an Inadvertent Gain Fee.

As first reported by EnergyChoiceMatters.com, AEP Texas had proposed a new Inadvertent Gain Fee of $27, and a proposal for decision in the case would have approved the fee

The settlement, except as noted below, would adopt system-wide consolidated rates and tariffs for the AEP Texas Central and AEP Texas North divisions

As part of the rate consolidation, AEP Texas agrees to provide its North Division Transmission class a credit equal to $300,000 per year for two years, to be funded by AEP Texas. The Rider TNTC – Texas North Transmission Credit, applicable only to transmission class customers in the North Division, initially would be set at a credit of $1.11 Per Transmission 4CP kW

The settlement includes a new rider -- Income Tax Refund (ITR) Rider -- for AEP Texas to refund to transmission customers and distribution customers (retail electric providers) certain savings recorded under changes in federal tax law

Under the stipulation, AEP Texas will refund $76 million to distribution customers (REPs) through its proposed ITR Rider over a one-year period.

Notably, the settlement provides that the ITR Rider will be implemented separately for each division.

As previously reported, rather than a volumetric charge, the Income Tax Refund Rider (ITR) is to be applied as a percent of a REP's distribution charges.

The monthly Income Tax Refund Class Factor (ITR) factor provides for an adjustment to the monthly Base Rate Charges of each applicable rate schedule. As stated in a proposed tariff under the settlement agreement, "The REP on behalf of the Retail Customer, will be credited the Income Tax Refund based on the monthly credit factor for each rate class (ITR Factor) multiplied by the Retail Customer’s monthly base rate revenue during the effective period. Base rate revenue includes the Customer Charge, the Metering Charge, the Distribution System Charge, and the Facilities Charge for Lighting Customers, as shown in the Monthly Rate, Section I of each Retail Delivery Rate Schedule."

Under the stipulation, the ITR Factor would be the same for all customer classes in a service division

In the Central service division, the ITR Factor would be (0.109600) [a credit rate of 10.96%] for all classes.

In the North service division, the ITR Factor would be (0.254400) [a credit rate of 25.44%] for all classes.

Note that these credit amounts are significantly higher than AEP Texas' original proposal (3.35% for all customer classes in both service areas), due in part to an acceleration of the refund period to be over only one year, versus the originally proposed four years

The settlement also includes the following riders that would only apply to Central division customers (but not including the former Oncor McAllen/Mission service area): Transition Charge - 2 Rates – Rider TC-2; Transition Charge - 3 Rates – Rider TC-3; Rider NDC – Nuclear Decommissioning Collections; Rider SRC – System Restoration Charge Factors; and Rider ADFIT – ADFIT Credit

The settlement eliminates the separate Advanced Metering System Cost Recovery Factor Rider (AMSCRF) and moves such costs into base rates. Currently, Rider AMSCRF in the Central division is a flat monthly charge of $2.26 for residential customers and $4.17 for Secondary Less Than Or Equal To 10 kW customers. In the North division, Rider AMSCRF is currently $2.35 for residential customers and $4.40 for Secondary Less Than Or Equal To 10 kW

As there will still be some riders only applicable to each service area notwithstanding rate consolidation, AEP Texas agrees to publish a rate matrix on its website showing the riders applicable to each division.

Under the settlement, AEP Texas will recover all existing and future transmission-related costs through its transmission cost recovery factor (TCRF) instead of through base rates.

The new base rates under the settlement for mass market customers are below, along with current rates for a comparison:

Residential

Residential - Settlement
Customer Charge      $1.40 per Customer per Month
Metering Charge      $3.39 per Customer per Month
Transmission (Base)  $0.0000 per kWh
Distribution         $0.021791 per kWh


Residential - Current - Central Division
Customer Charge      $3.19 per Customer per Month
Metering Charge      $3.55 per Customer per Month
Transmission (Base)  $0.005190 per kWh
Distribution         $0.013915 per kWh


Residential - Current - North Division
Customer Charge      $2.94 per Customer per Month
Metering Charge      $5.24 per Customer per Month
Transmission (Base)  $0.005803 per kWh
Distribution         $0.019007 per kWh






Secondary Less Than Or Equal To 10 kW 

Secondary Less Than Or Equal To 10 kW - Settlement
Customer Charge      $1.40 per Customer per Month
Metering Charge*     $4.39 per Customer per Month
Transmission (Base)  $0.00 per kWh
Distribution         $0.021093 per kWh


Secondary Less Than Or Equal To 10 kW  - Current
 - Central Division
Customer Charge      $3.20 per Customer per Month
Metering Charge*     $3.68 per Customer per Month
Transmission (Base)  $0.002512 per kWh
Distribution         $0.015489 per kWh


Secondary Less Than Or Equal To 10 kW - Current
 - North Division
Customer Charge      $4.25 per Customer per Month
Metering Charge*     $7.50 per Customer per Month
Transmission (Base)  $0.003148 per kWh
Distribution         $0.031948 per kWh

*does not apply to unmetered service

Concerning the effective date of new rates, the settlement provides that if the Commission issues a final order on or before February 29, 2020, then the approved rates should be effective on March 30, 2020, the first billing cycle in April. If the Commission issues a final order after February 29, 2020, then the approved rates will be effective on the date of the first billing cycle of the month occurring a minimum of 45 days after issuance of a final order.

The settlement includes certain ring fencing provisions. Of note are the following:

• AEP Texas must not share its credit facility with any unregulated affiliates.

• AEP Texas assets must not secure the debt of AEP or its non-AEP Texas affiliates.