Texas Senate Passes Bill To Require Retail Electric Providers To Serve Auto-Renewed Customers On Mandated "Default" Product

The Texas Senate has passed an amended version of the House bill (HB 16), banning wholesale pass-through electric products, and the Senate version includes a new mandate that retail electric providers must serve customers, who do not make an affirmative choice at the time of renewal, under a standard "default" product, until such time that the customer makes an affirmative choice

As the bill differs from the version passed by the House, the House may either accept the Senate changes, or the bill must go through a conference process, before being sent to the governor

Under HB 16 as passed by the Senate, if a customer does not select another retail electric product before the expiration of the customer's contract term with a retail electric provider, and the REP has provided the required renewal notices, the provider shall automatically serve the customer through a default renewal product that the customer may cancel at any time without a fee.

The default renewal product must be: (1) a month-to-month product in which the price the customer pays for electricity may vary between billing cycles; and (2) based on clear terms designed to be easily understood by the average customer.

Moving a customer not making an affirmative choice to the new default renewal product may only occur if the REP has complied with the new renewal procedures included in HB 16 (described further below)

If a retail electric provider does not provide notice of the expiration of a customer's contract with the provider in accordance with HB 16, and the customer does not select another retail electric product before the expiration of the customer's contract term with the provider, the retail electric provider must continue to serve the customer under the pricing terms of the fixed rate product contract until: (1) the provider provides notice of the expiration of the contract in accordance with this section; or (2) the customer selects another retail electric product.

For residential customers, HB 16 would require REPs to provide three renewal notices to fixed price customers (versus the current single notice)

The notices must be provided during the last third of the contract period and in intervals that allow for, as practicable, even distribution of the notices throughout the last third of the contract period. The final notice for a contract with a period of more than four months must be provided at least 30 days before the date that the contract will expire. The final notice for a contract with a period of less than four months must be provided at least 15 days before the date that the contract will expire.

The retail electric provider must provide each notice to the customer by mail at the customer's billing address, unless the customer has opted to receive communications electronically from the retail electric provider.

The notices must describe any renewal offers the retail electric provider chooses to make available to the customer and identify methods by which the customer may obtain the contract documents for each of the offered products.

The final notice must include the pricing terms for the default renewal product described above

HB 16 would also require that a retail electric provider shall include in each contract for service the terms of the default renewal product that the customer will automatically be enrolled in if the customer does not select another retail electric product before the expiration of the contract term.

All of the provisions described above are unique to the Senate bill.

The Senate bill also added provisions related to the prohibition on wholesale pass-through products as passed by the House

The Senate bill still defines "wholesale indexed product" to mean a retail electric product in which the price a customer pays for electricity includes a direct pass-through of real-time settlement point prices determined by the independent organization certified under Section 39.151 for the ERCOT power region.

The Senate bill provides that an aggregator, a broker, or a retail electric provider may not offer a wholesale indexed product to a residential or small commercial customer (the House version was limited to residential customers).

However, the Senate version of HB 16 adds a "signed" customer affirmation requirement for large customers who agree to a wholesale indexed product

Under the Senate bill, an aggregator, a broker, or a retail electric provider may enroll a customer other than a residential and small commercial customer in a wholesale indexed product only if the provider, aggregator, or broker obtains before the customer's enrollment an acknowledgment signed by the customer that the customer accepts the potential price risks associated with a wholesale indexed product.

Such acknowledgment must include the following statement, in clear, boldfaced text: "I understand that the volatility and fluctuation of wholesale energy pricing may cause my energy bill to be multiple times higher in a month in which wholesale energy prices are high. I understand that I will be responsible for charges caused by fluctuations in wholesale energy prices."