PUC punts on rule opposed by consumers

One-way Ratemaking would lead to One-Way Rate Hikes

The Texas Public Utility Commission has pressed the pause button on new rules that would have made it much easier for electric utilities to hike rates.

A favorite of utility lobbyists, the proposed rules would have opened the door to quick hikes associated with the poles and wires that connect the transmission system to individual homes and businesses. Consumer groups have been united in their opposition.

Some Commission watchers had predicted the rules would get the go-ahead this month. But then in an unexpected change of course, the Commissioners on Dec. 16th instead indicated they would wait for direction from the Texas Legislature, which convenes in January.



Commissioner Anderson

In explaining the decision, Public Utility Commissioner Kenneth Anderson said he had talked with several legislators who indicated they “wanted to take a crack” at considering the rule. “We should set this aside until June, to give the Legislature time to look at it,” he said.

Numerous interested parties — including the office of the Texas Attorney General — have argued at the PUC that the agency lacks the statutory authority to enact the rules. And while Commission Anderson stated he had not heard much opposition, multiple consumer groups nonetheless have warned that the rules would lead to rate hikes — even during periods when electric utilities don’t need extra money because overall profits are on the rise, or when the utilities’ overall expenditures are going down.

The rules are technically known as the “Distribution Cost Recovery Factor” (or “DCRF”) rules, although the electric utility industry euphemistically refers to them as “streamlined” ratemaking. Consumers call it “one-way” ratemaking because under the rules, rate adjustments likely will flow only in one direction: up.

Consumers also note that the alleged benefits of the regulatory gimmick have never been demonstrated. For instance the office of the Attorney General Greg Abbott, who has sided with Texas consumers in the case, notes in a regulatory filing that advocates of the rule have failed to produce any analysis showing it creates litigation savings.

-- R.A. Dyer

PUC sets new energy efficiency rules

State programs intended to increase energy efficiency — but which also stand to increase consumer bills — will operate under new rules as a result of recent action by the Texas Public Utility Commission.

The PUC last year began the process of revamping its rules for its ongoing Energy Efficiency Implementation Program. Under this program, utilities are required to spend money to encourage energy efficiency at the consumer level. For instance, the program provides funding to encourage the marketing of energy-saving appliances. The rules also establish utility goals for reducing overall energy demand and utilities that meet or exceed their goals become eligible for performance bonuses. But the Energy Efficiency Implementation Program can end up increasing electricity bills because both the cost of administering the program and the cost of the bonuses are recoverable by the utility in rates passed on to the consumer.

Rule changes initially proposed by Commission staff and supported by utilities and environmental groups raised the energy efficiency goals dramatically, with a corresponding increase in the program cost cap and available bonuses. The Steering Committee of Cities Served by Oncor, a coalition of municipalities represented by the Lloyd Gosselink law firm, urged the Commission to consider the cost effectiveness of those proposed changes — and the PUC commissioners echoed those concerns.

The rules ultimately adopted by the PUC commissioners on July 30 attempt to strike a balance between the interest of promoting energy efficiency and the interests of ratepayers. For instance, the Commission agreed that the proposed goals will be raised in the future, although they will be raised at a much lower rate than originally proposed. The performance bonus also will remain at current levels, although the administrative cost cap has been raised to account for the raised goals.

Additionally, the Commission imposed a cost cap for both residential and non-residential customers. For the 2011 and 2012 program years the cost cap will be $1.30 per month for residential customers, or .0001 cents per kilowatt/hour — whichever is higher. The cap increases again in 2013. The Commission also instituted cost protections relating to the method by which the cost cap and the bonuses are calculated. For example, under the new rules the cost of the bonuses are to be included in the cost cap for utilities.

The rules will go into effect December 1.

-- Eileen McPhee

CREZ Update: Lines could impact 12 counties

A transmission line project proposed just this week for the Amarillo area is already stirring controversy, according to a news story in the Amarillo Globe-News. Writer Kevin Welch  reports in the newspaper's June 17th edition on the application by Sharyland Utilities to build lines from southern Carson County to southeast Deaf Smith County.  The utility has proposed the route shown above, although that route could change as more landowners express their views at the Texas Public Utility Commission.

"In all the cases we've been involved in, in none of them have the commissioners chosen the preferred route," Lloyd Gosselink attorney Georgia Crump told the newspaper. "They're trying to weigh all the criteria. It's not a science, it's an art." Among Crump's clients is a property owner with lines passing north of Palo Duro Canyon State Park.

Sharyland's application was among three filed by utilities this week for major transmission projects. The lines included in the applications will transmit power from wind generators in West Texas and the Panhandle, and are associated with the state's Competitive Renewable Energy Zone program, or  "CREZ" for short.

The transmission lines proposed by Sharyland could impact property owners in Armstrong, Carson, Deaf Smith, Oldham, Potter and Randall counties. Separately, Oncor filed an application for lines that could impact landowners in Tarrant, Wise and Parker Counties. A third company filed an application for a transmission project near Abilene, with lines that could impact Kent, Dickens and Scurry counties.

With the filings this week, a procedural clock begins at the PUC under which the agency has 180 days to conduct hearings, consider testimony and render decisions.

Proposed PUC Rules Draw Fire

Unfair and anticompetitive. That’s how some members of the public and consumer advocates have characterized proposed rules that would keep Texans from getting electric service if they owe an outstanding balance to a previous electric provider.

These complaints and others were aired during a May 17th public hearing in Austin regarding proposed changes to the Public Utility Commission’s rules for electricity service disconnections. The changes would modify eligibility requirements for deferred payment plans and other low-income customer protections. They also modify the disconnection notice requirements as they pertain to customers with life-threatening medical conditions. Finally, the proposed rules contain the controversial switch-hold provisions intended to keep customers from changing retail providers without first paying any balance they owe to their previous provider.

Various groups offered comments on the proposed rules. Some participants requested removal of language that would prevent customers with battery backups for medical devices from qualifying for special protection. Participants also said that seriously ill and disabled customers should never face disconnections. Participants overwhelmingly weighed in against the switch-hold portion of the proposed rules.

Various parties also filed written comments, which can be found here and here. Additional comments are due Friday, May 21.

-- Eileen McPhee

District judge sides with electricity consumers

The Texas Public Utility Commission failed to explicitly consider costs to electric consumers when it awarded billions of dollars in transmission construction projects last year, a state district judge has determined.

The finding, part of a case that could impact how much Texans end up paying as a result of the Competitive Renewable Energy Zone process, was included in a recent letter from state District judge Stephen Yelenosky to lawyers for the City of Garland and the Texas Attorney General’s office.

Garland has claimed in a lawsuit that the PUC failed to consider the potential benefits to electric consumers when it rejected the city’s utility proposal to build some of the CREZ lines. Judge Yelenosky, in a Dec. 21 letter, signaled that he tends to agree. The judge (that's a picture of him at the left) is expected to issue an order in the case on Jan. 15.

Because it is municipally owned, the Garland utility does not pay various taxes common to commercial ventures and can borrow money at a lower cost. Garland has argued that such advantages would lead to lower costs for consumers had it been selected to participate in the transmission projects.

But in its decision to award the projects to Oncor, Sharyland and other transmission developers, the PUC appears not to have explicitly considered what’s most cost-effective for electric customers, Yelenosky stated in his letter.

Attorneys representing the PUC suggested that “customers” be read as the “people of Texas,” wrote the judge. But state law clearly requires the PUC to consider what’s most beneficial and cost-effective to “electric customers” and that “neither the PUC, nor this court, can ignore statutory language or choose to give it a definition it does not have,” he wrote.

Yelenosky also noted that the PUC overstepped its statutory authority in other ways. “The PUC relied upon factors that are not relevant to providing transmission capacity in a manner most beneficial and cost-effective to electric customers and based its decision on underlying findings that lack substantial evidence,” he stated.

The city of Garland, through its municipally-owned utility, already operates more than 130 miles of transmission lines, which serve not only their own customers but also residents in Dallas. Garland is one of 13 transmission operators certified to operate in ERCOT.

The PUC came under similar criticism that it was failing to look out for consumers in its CREZ deliberations when commissioners signaled to transmission developers last year that they should not seek economic stimulus assistance from the Obama Administration. Such assistance could have shaved tens of millions of dollars from the cost of CREZ construction, according to some estimates.

Current estimates put the CREZ price tag at about $4 per month for residential customers. The lines are expected to be up and running by 2013.

ERCOT faces "special purpose review" in 2010

ERCOT, for the first time in its nearly 40-year history, faces review by the Sunset Advisory Commission. Consumer groups, industry representatives and other stakeholders are expected to provide input for the review, which will then become the basis of legislation that could lead to dramatic changes for the organization.
Created in 1977, the Sunset Advisory Commission is a legislative body charged with reducing waste in state government by assessing the continued effectiveness and necessity of agencies. It is made up of five members appointed by the speaker of the Texas House of Representatives and five members appointed by the lieutenant governor, who presides over the Senate. The chair of the Sunset Advisory Commission is state Sen. Glen Hegar, Jr., of Katy.

ERCOT has already submitted a self-evaluation report to the Sunset Commission staff, which is expected to issue its preliminary findings in mid-April. The public will then get a chance to comment on those findings during a public hearing in May, and the Commission will amend the report and take a final vote in July. This final report (which will include changes ordered by the Sunset Advisory Commission) will form the basis of legislation that is expected to be filed for the 82nd Texas Legislature that convenes in January, 2011.

That the Sunset Advisory Commission is even reviewing ERCOT is unusual. Traditionally the Sunset Commission evaluates only state agencies, such as the Public Utility Commission — and not quasi-governmental non-profit corporations, such as ERCOT. But state Rep. Burt Solomons, chair of the House State Affairs Committee, pushed to include the ERCOT review in legislation adopted during a brief special session in 2009. Solomons had expressed displeasure with some of ERCOT’s spending practices — specifically citing the over-budget nodal transition — and also said that conducting a Sunset-style review in 2010 made sense, given that the PUC and the Office of Public Utility Counsel also were undergoing the Sunset process.

Typically, state agencies come up for Sunset review once every 12 years and agencies under such review are automatically abolished unless the Texas Legislature adopts legislation to continue them. But because ERCOT is not a state agency, lawmakers will not need to pass a new bill to maintain its existence. Another distinction between the ERCOT “special purpose review” and more typical Sunset reviews is that the cost of the ERCOT evaluation will be paid for by ERCOT itself — and therefore passed onto electric ratepayers. With other Sunset evaluations the cost is paid by tax dollars.

Besides Chairman Hegar, the other lieutenant governor appointees to the Commission include Sen. Juan “Chuy” Hinojosa of McAllen, Sen. Joan Huffman of Lake Jackson, Sen. Robert Nichols of Jacksonville, Sen. John Whitmire of Houston and public member Charles McMahen. Sens. Huffman, Nichols and Whitmire and public member McMahen were newly appointed by Lt. Gov. David Dewhurst in October. On Nov. 9 House Speaker Joe Straus appointed Rep. Dennis Bonnen of Angleton to serve as vice chairman for the Commission. He also appointed as new members Rep. Rafael Anchia of Dallas, Rep. Bryon Cook of Corsicana, and public member Lamont Jefferson. House members serving existing terms are Reps. Linda Harper-Brown of Irving and Carl Isett of Lubbock.

-- R.A. Dyer

PUC adopts customer protection rules relating to HB 1822

The Public Utility Commission adopted rules Friday for the implementation of House Bill 1822, a consumer protection bill from the 2009 legislative session. Sponsored by state Rep. Burt Solomons, HB 1822 calls for establishing definitions of terms commonly used on utility bills. It also requires that retail electric providers (REPs) print on bills the end date of multi-month contracts.

This second requirement emerged as a contentious flash point during negotiations at the PUC. Some retail electric providers expressed discomfort with the specific end-date requirement, arguing instead for the option to print on bills a more general description of the contract end date. PUC staff and consumer groups argued that HB 1822 included a specific mandate requiring that REPs print the exact termination date, and that using a less specific description only would add to customer confusion.

The three PUC commissioners on Friday agreed to give REPs the option of either printing a specific termination date, or of using a more general description of the end date. However, those REPs opting for the broader description also face a new requirement that they waive early termination penalties for up to 60 days before a contract expires, as opposed to the 14 days currently in rules.

The PUC also appeared to agree with some consumer recommendations relating to the use of common billing terms. REPs had requested flexibility to choose between different terms such as "surcharge," "fee" or "factor" to describe the same billing element. REPs also wanted the option of using either "base charge" or "customer charge" to describe the same element.

Consumer groups argued that the PUC should settle on a single term for each billing element -- and that all REPs should then be required to stick to the uniform term. The rules adopted Friday generally follow that recommendation.

The PUC set an April 1 implementation date for the new rules.

-- R.A. Dyer