Texas Gov. Signs Bill Requiring Retail Electric Providers To Serve Auto-Renewed Customers On Mandated "Default" Product

Texas Gov. Greg Abbott has signed HB 16, which prohibits wholesale indexed electricity plans for residential and small commercial customers, and also requires REPs to serve customers on a default renewal contract if the customer takes no affirmative action at renewal

The future of wholesale indexed plans in the mass market is now dependent on the ultimate passage of SB 3, which would allow such plans to continue for small customers, subject to a price cap and notice requirements. As passed by the House, SB 3 would take precedence over the ban under HB 16. Different versions of SB 3 have been passed by both the House and Senate, and the Senate must either concur with the House's changes, or the bill will be sent to conference, in order to be enrolled and sent to the governor

See details on SB 3 here

HB 16, which is now scheduled to take effect on Sept. 1 after having been signed by the governor, absent any other bills addressing the issue, defines "wholesale indexed product" as, "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."

Under HB 16, an aggregator, a broker, or a retail electric provider may not offer a wholesale indexed product to a residential or small commercial customer.

Furthermore, under HB 16, 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.

The acknowledgment required for large customers 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."

This acknowledgment required may be included as an addendum to a contract.

Under HB 16, a retail electric provider that provides a wholesale indexed product to a customer must keep on file the acknowledgment required for large customers for each customer while the customer is enrolled with the retail electric provider in the wholesale indexed product.

Requirement For REPs To Offer Default Renewal Product; New Contract Renewal Notice Requirements

Under HB 16, 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 requires 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 also requires 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.

The changes in law made by the Act apply only to an enrollment or re-enrollment of a customer in a retail electric product that is executed on or after the effective date of the Act. An enrollment or re-enrollment of a customer in a retail electric product that is executed before the effective date of the Act is governed by the law as it existed immediately before the effective date of the Act, and that law is continued in effect for that purpose.