Control Number : 36131

(1)

Control Number : 36131

Item Number : 65

(2)

PROJECT NO. 36131

RULEMAKING RELATING TO DISCONNECTION OF ELECTRIC SERVICE AND DEFERRED PAYMENT PLANS

§ PUBLIC UTILITY COMMISSION

§ OF TEXAS

§

.

§

REPLY COMMENTS OF THE RETAIL ELECTRIC PROVIDER GROUP

Contact: Stephen J. Davis vL,^

(512) 479-9995 (512) 479-9996 (facsimile) davis@sj dlawoffices.com

May 21, 2010

PROJECT NO. 36131

RULEMAKING RELATING TO § PUBLIC UTILITY COMMISSION

DISCONNECTION OF ELECTRIC § OF TEXAS

SERVICE AND DEFERRED PAYMENT §

PLANS §

§

REPLY COMMENTS OF THE REP GROUP

The Retail Electric Provider Group (REP Group)t timely files these joint reply comments addressing proposed modifications to P.U.C. SUBST. R. 25.454 relating to Rate Reduction Programs, P.U.C. SUBST. R. 25.480 relating to Bill Payment and Adjustments, and P.U.C. SUBST. R. 25.483 relating to Disconnection of Service, as published in the Texas Register on April 16, 2010. Absence of a response to any particular comment should not be considered as agreement or disagreement by the REP Group with those comments.

1. SWITCH-HOLDS

The REP Group appreciates the careful balance that must be struck in crafting the comprehensive solution that the Commission and interested stakeholders have been working to

achieve in this rulemaking. Under existing P.U.C. SUBST. R. 25.480, REPs are required to

provide certain customers with no-interest, unsecured credit. Proposed P.U.C. SUBST. R. 25.480 seeks to expand protections for vulnerable customers who have difficulty paying electric bills, especially in the summer and winter months, while limiting further bad debt costs that ultimately

increase prices to customers who timely pay their bills. The switch-hold mechanism is an

important component of a workable comprehensive solution. The switch-hold mechanism

` The REP Group is composed of the Alliance for Retail Markets (ARM), CPL Retail Energy LP, Direct Energy LP, Texas Energy Association for Marketers (TEAM), TXU Energy Retail Company LLC, and WTU Retail Energy LP. The members of ARM participating in this proceeding are: Direct Energy LP; First Choice Power, Green Mountain Energy Company; Gexa Energy, LP; and Stream Energy. The members of TEAM participating in

this proceeding are: Accent Energy, Amigo Energy, Cirro Energy, Green Mountain Energy Company, Hudson

Energy Services, Just Energy, StarTex Power, Stream Energy, Tara Energy, and TriEagle Energy.

(5)

encompassed in this rulemaking would not prevent any customer from switching to a provider of choice. Rather, under the proposal, customers would be required to pay back a no-interest loan before making the switch to a different provider.

A. The Public Utility Regulatory Actz (PURA) provides the Commission with the authority to implement the proposed switch-hold mechanism.

Many of the parties opposing the switch-hold mechanism in proposed P.U.C. SUBST. R. 25.480 contend there is a lack of statutory authority for the concept.3 They assert that nothing in PURA either expressly or impliedly authorizes the Commission to allow a retail electric provider (REP) to prevent a customer that has agreed to a deferred, level, or average payment plan from switching retail electric service until those payment obligations are satisfied. Among other things, they claim that certain provisions in the statute, including those entitling customers to choose their REP, actually preclude implementation of the switch-hold mechanism in the proposed rule as a matter of law. These arguments fail to recognize, however, that certain provisions in PURA plainly authorize the switch-hold mechanism, including those that authorize the Commission to adopt and enforce rules relating to the extension of credit, levelized billing programs, and termination of service (e.g., PURA §§ 17.004(b) and 39.101(e)).

Indeed, just over a month ago, the Commission in Project No. 37291 rejected identical and similar legal arguments made by those same parties in opposition to the switch-hold

2 Public Utility Regulatory Act, Tex. Util. Code Ann. §§ 11.001-66.017 (Vernon 2007 & Supp. 2009) (PURA).

' Initial Comments of Steering Committee of Cities Served by Oncor to the Rule as Published April 6,

2010 at 1-2 (May 6, 2010) (hereafter "Initial Comments of Cities"); Initial Comments of Reliant Energy Retail Services, LLC at 2 (May 6, 2010) (hereafter "Initial Comments of Reliant"); Initial Comments of Texas Legal Services Center, Texas Ratepayers' Organization to Save Energy, et at. at 17-19 (May 6, 2010) (hereafter "Initial Comments of TLSC/Texas ROSE"); Comments of AARP on Proposal for Publication of Amendments to §§ 25.454, 25.480, and 25.483 at 2 n. l(May 6, 2010) (hereafter "Initial Comments of AARP")

(6)

provisions in the recently-adopted meter tampering rule, P.U.C. SUBST. R. 25.126.4 Under that new rule, a customer who is back-billed for transmission and distribution utility (TDU) charges

related to meter tampering and/or assessed meter repair and restoration charges is prevented from

switching retail electric service until those payment obligations are satisfied or until such other time authorized by the new rule.5 While the decision whether to apply an authorized switch-hold to an ESI ID subject to a payment plan is left to the REP's discretion under proposed P.U.C. SUBST. R. 25.480, subsection (g) of the new meter tampering rule requires a TDU to place a switch-hold on the affected ESI ID once it determines that tampering has occurred at the premises.

In addressing the legal arguments raised in Project No. 37291, the Commission first identified the policy rationale in support of adopting a mandatory switch-hold mechanism as part of the new meter tampering rule. The Commission reasoned that the interest of a small segment of customers to switch service to another REP (i.e., customers who engage in or benefit from meter tampering but do not satisfy payment of back-billed and other charges relating to the tampering) were outweighed by the interest of all customers in the competitive retail electric market to receive "reasonably priced electricity," an entitlement cited in the retail customer protections stated in PURA § 3 9.101(a)(1).

The Commission then observed that the legal right of vertically-integrated electric

utilities to disconnect service for non-payment continues to provide those companies an effective way to leverage customer payment of outstanding billed amounts, including amounts relating to meter tampering. The Commission recognized that REPs operating in areas of the State subject

° Rulemaking Relating to Meter Tampering and Disconnection and Reconnection of Service for Customers

with Advanced Meters, Project No. 37291, Staffs Proposed Order for Consideration at the April 1, 2010 Open

Meeting at 23-29 (March 26, 2010).

Id. at 88 (subsection (g)).

(7)

to customer choice currently lack an equivalent tool for leveraging customer payment, given the

unfettered ability of customers to switch service. The Commission concluded that the resulting bad debt experienced by REPs when customers fail to pay meter tampering-related billings and charges increases the price of retail electric service for all customers in the competitive market, contrary to the universal customer interest in, and entitlement to, reasonably priced electricity. In an effort to ensure that all customers receive reasonably priced electricity consistent with the statute, the Commission approved the switch-hold mechanism in the new meter tampering rule.

The policy reasoning relied upon by the Commission in Project No. 37291 to justify implementation of the switch-hold mechanism equally applies here. Again, the impact of bad debt on the price of retail electric service is the key. Similar to the balancing of customer interests performed in Project No. 37291, the interest of a small segment of customers to switch service to another REP (i.e., customers who agree to deferred, level, or average payment plans and then fail to honor their agreement to fully satisfy payment before switching retail electric service) is far outweighed by the interest in reasonably priced electricity that all customers served by the competitive retail market share. The bad debt that accumulates when customers fail to fulfill their financial obligations under deferred, level, and average payment plans increases the price of retail electric service to the detriment of that universal customer interest. The REP Group's Initial Comments detail the significant levels of bad debt that REPs have experienced in this regard.6 Consequently, adoption of the switch-hold mechanism in proposed P.U.C. SUBST. R. 25.480 is appropriate because it will help mitigate the impact of payment plan-related bad debt on retail electric pricing, which will further the interest of reasonably priced electricity for all customers. This step will assist in closing a problematic loophole that exists

6 Initial Comments of the REP Group at 6-10 (May 6, 2010).

(8)

under the current market design; however, it will not address the problem completely as

customers who are not on payment plans can still switch providers without paying outstanding balances and final bills.

As further justification for authorization of the switch-hold mechanism in Project No. 37291, the Commission noted that PURA § 17.008(d) constrains REPs' ability to mitigate

the bad debt relating to the unfettered switching of retail electric service. This statutory

provision states that a REP may not deny an applicant's request to become a residential retail electric customer on the basis of the applicant's credit history, credit score, or utility payment

data. Although use of the applicant's electric bill payment history is permitted under PURA

§ 17.008(d) for such purpose, such information currently is not available to REPs in any comprehensive or workable format. Previous efforts to investigate the possibility of creating a customer payment database for use by REPs in the competitive retail market have failed to progress to any meaningful stage to date.7

REPs are also constrained in addressing the bad debt issue by certain customer protection requirements imposed by various Commission rules, which is why comparisons between the competitive electric service industry and other competitive service industries are not well suited. In Project No. 37291, the Commission recognized the problems inherent in these comparisons. In that proceeding, the Commission distinguished the competitive retail electric market in Texas from other competitive retail sectors in addressing the argument made there (and repeated in this proceeding) that mechanisms equivalent to the switch-hold currently do not exist in any comparable competitive service industry. Those same distinctions continue to apply here.

' See, e.g,. Rulemaking Relating to Customer Database of Bill Payment Information, Project No. 36860,

(last Commission action was in August, 2009).

(9)

For starters, service providers in other competitive industry sectors are not subject to the same type of credit extension and customer deposit requirements with which REPs must comply

as a condition of participating in the competitive retail electric market in Texas. In P.U.C.

SUBST. R. 25.478, the Commission has adopted customer protection provisions pursuant to PURA §§ 17.004(b) and 39.101(c) that limit REPs' discretion to address credit and customer

deposit issues. These provisions in the customer protection rules impact the extent to which

REPs can limit or mitigate their bad debt exposure. Further, many of the industries cited for comparison (e.g., mobile phone, cable TV, and Internet) bill in advance, not in arrears as is the

common practice in the electricity industry. While PURA § 39.001(d) properly directs the

Commission to use competitive rather than regulatory methods to achieve the goals of PURA Chapter 39, and to adopt practical rules that impose the least impact on competition, the avenues by which competitive solutions may resolve the bad debt issue underlying the switch-hold mechanism in proposed P.U.C. SUBST. R. 25.480 are very limited.

More importantly, the right of a customer to choose a REP, which is embodied in PURA §§ 17.004(a)(2), 39.101(b)(2), and 39.102, is not absolute, contrary to the central legal argument propounded by parties opposing the switch-hold mechanism in Project No. 37291 and in this rulemaking proceeding. Stated another way, the right to choose a REP is not one and the same as the right to switch retail electric service without condition. PURA § 39.101(b)(2) expressly conditions the exercise of the right of customer choice on consistency with Chapter 39 of the statute. Both PURA § § 17.004(b) and 39.101(e) authorize the Commission to adopt and enforce rules relating to the extension of credit, levelized billing programs, and termination of service. Clearly, the switch-hold provisions in proposed P.U.C. SUBST. R. 25.480 encompass those three areas. Furthermore, PURA §§ 17.004(a)(1), 17.004(b), 39.101(b)(6), and 39.001(e) authorize the

(10)

Commission to adopt and enforce rules to protect retail electric customers from fraudulent, unfair, misleading, deceptive, or anticompetitive practices. As noted in Project No. 37291, such practices are not limited only to the actions undertaken by REPs. They may also encompass the actions of other retail electric customers.

Also, the concept of requiring customers to satisfy their obligation to pay their electric service provider for service provided prior to taking service from another provider has precedent outside the context of retail competition in Texas. In those areas of the State outside ERCOT in which customers have the option to switch service to any electric or municipally owned utility that is certificated to provide electric service, the disconnecting utility has the right under P.U.C. SUBST. R. 25.27(f)(1)(E) to receive payment of a switchover fee and any other outstanding charges from the departing customer prior to the commencement of the connecting utility's service to the customer. The Commission adopted this requirement in 1999, prior to when parts

of the State were opened to retail electric competition under Senate Bill 7. The objective

underlying this requirement in the Commission's switchover rule-that is, to ensure that the departing customer has satisfied its payment obligations to its current service provider prior to taking electric service from another provider-is no different from the objective underlying the switch-hold mechanism in proposed P.U.C. SUBST. R. 25.480.

Finally, implementation of the switch-hold mechanism in proposed P.U.C. SUBST. R. 25.480 will not result in any unlawful tying of a competitive retail electric service with a monopoly service, as alleged by Texas Legal Services Center, Texas Ratepayers' Organization to Save Energy, et at. (TLSC/Texas ROSE). 8 Precluding a customer from switching service until such time that agreed-to payment plan obligations are satisfied does not transform the retail

8 Initial Comments of TLSC/Texas ROSE at 4.

(11)

electric service provided by the customer's REP from a competitive service to a monopoly

service. PURA § 39.001(a) states that the sale of retail electricity is not a monopoly service, and the implementation of a switch-hold mechanism does not and cannot modify that legislative finding. A customer residing at a premises with an ESI ID subject to a switch-hold pursuant to proposed P.U.C. SUBST. R. 25.480 will continue to have the right to choose a REP in the

competitive retail electric market, conditioned upon satisfaction of commitments and agreements

under a payment plan entered into with the current REP.

B. Existing tools to manaPe bad debt do not address bad debt associated with the extension of credit that results from Payment plans mandated or encouraged by proposed P. U.G SUBST R. 25.480.

Several parties filed initial comments suggesting that REPs should avail themselves of existing tools to manage bad debt. The tools described by Reliant Energy Retail Services, LLC, (Reliant) included: examination of a REP's internal definition of satisfactory credit; review of processes to ensure the proper collection of security deposit amounts (up to the limit imposed by P.U.C. SUBST. R. 25.478(e), relating to Credit Requirements and Deposits); review of the REP's internal policies to ensure customer deposits are not returned unless there have been 12

consecutive months of on-time payments; collection of additional deposits when appropriate;

refusal to serve customers attempting to evade payment by changing the name of the account-holder; refusal to serve customers who previously "walked" on the REP; and transfer of outstanding balances from a previous account to the customer's current account with the REP.9 TLSC/Texas ROSE argue that REPs have a responsibility for being prudent in their underwriting

(12)

and debt collection practices and that improvements should be made to ensure the timely release

of bill payment histories. ' o

The REP Group agrees that the tools suggested by Reliant and TLSC/Texas ROSE are all good debt-management tools that REPs should be using in the market to the extent possible. However, the tools described fail to address the potential for bad debt associated with the

payment plans mandated and encouraged by proposed P.U.C. SUBST. R. 25.480. Security

deposits, whether initial or additional deposits, are intended to address the fact that, for the most part, REPs sell electricity on credit." In the normal post-pay model, customers use electricity before a bill for the service is generated. Thus, a REP may provide 65 to 80 days of service before it is allowed to disconnect a customer for non-payment of a bill for electric service.12 It is these 65 to 80 days of electricity service that security deposits are intended to cover.

Proposed P.U.C. SUBST. R. 25.480 mandates that REPs offer deferred, level, or average payment plans to certain customers beyond what the rule requires today, and encourages REPs to offer these types of plans even when the offer would not be mandated by the proposed rule. These plans allow customers to obtain credit beyond the normal 65 to 80 day service period covered by the security deposit permitted in P.U.C. SUBST. R. 25.478. These no-interest loans by REPs to their retail customers increase the REP's potential exposure in the event the customer

is unable to pay its outstanding balance in full. While the Office of Public Utility Counsel

10 Initial Comments of TLSC/Texas ROSE at 11-13.

" The REP Group understands that this comment does not apply to prepaid service provided under P.U.C. SUBST. R. 25.498.

12

This service period can be extended during extreme weather conditions, as required by P.U.C. SUBST. R.

(13)

(OPUC)13, Reliantl4 and AARP1' suggest or imply that security deposits would cover these loans from the REP, the current customer deposit amount allowed by the customer protection rules is

insufficient to offset the costs and risks posed by these plans. Consequently, the REP Group

maintains that security deposits allowed by P.U.C. SUBST. R. 25.478 offer little protection for the additional extension of credit that would be required by the payment plans mandated and encouraged by the proposed rule.

The REP Coalition agrees that refusal to serve customers who have "walked" on previous bills and transferring old balances to existing customers, as suggested by Reliant, are helpful tools that REPs are using today to address overall bad debt. However, these practices do not effectively address the no-interest loans mandated and encouraged in this rulemaking. Likewise, refusing to serve customers based on bill payment history, as suggested by TLSC/Texas ROSE, does not address the risks posed by the payment plans mandated and encouraged in this rulemaking.

C. A threshold delinquent balance amount should not be required before a switch-hold can be applied to certain Payment plans.

OPUC, Reliant, AARP, and TLSC/Texas ROSE recommend that if switch-holds are allowed for certain payment plans, then a threshold delinquent balance amount should be met before a switch-hold can be applied.16 The amounts suggested include threshold amounts of

'' Initial Comments of the Office of Public Utility Counsel at 3 (May 6, 2010) (hereafter "Initial Comments of OPUC") (suggesting that a switch-hold should not apply for an amount owed that is less than the customer's deposit).

'`' Initial Comments of Reliant at 3 and 5-6 (suggesting a threshold before a switch-hold could apply equal to the average security deposit calculated to be about $450).

15 Initial Comments of AARP at 6 (stating that the Commission should adopt a threshold that is $500 above the dollar amount of security deposit).

16 Initial Comments of OPUC at 3; Initial Comments of Reliant at 3; Initial Comments of AARP at 6; Initial Comments of TLSC/Texas ROSE at 7-8.

(14)

$50017 or more. 18 These proposals would render any switch-hold policy meaningless. While usage varies, a $500 threshold equates to approximately two delinquent invoices plus a current

invoice (for most of the year). Because REPs should already be ensuring that their customers do

not go that far past due, a $500 threshold would not be appropriate. As stated earlier, the

payment plans included in the proposed rule are essentially no-interest loans that extend credit

beyond the normal post-pay model that exists in the retail electricity model. Accordingly, the

REP Group maintains that a threshold is not appropriate for these no-interest loans.

For

conventional loans, security is established at the beginning of the loan and is not released until

the terms of the loan are satisfied. That same principle should apply to the payment plans

addressed by the proposed rule.

D. There is no need for more study of the bad debt issue.

Several parties suggest that more study is needed before the switch-hold mechanism set

forth in the proposed rule is implemented.19 The issues around switch-holds being addressed in

this rulemaking have been debated before the Commission for several years. Examination of these issues began as early as the year 2003 in Project No. 27084, PUC Rulemaking to Revise

Customer Protection Rules. Furthermore, in its initial comments filed in this proceeding, the REP Group provided statistics about bad debt levels experienced by REPs in the Texas competitive market as compared to other utilities and other states.20 The time is now ripe for the implementation of the switch-hold mechanism contained in the proposed rule.

" Initial Comments of TLSC/Texas ROSE at 7-8. 'g Initial Comments of AARP at 6.

19 Initial Comments of TLSC/Texas ROSE at 13 and 19; Initial Comments of AARP at 1. 20 Initial Comments of the REP Group at 6-9.

(15)

E. REPs will not charge fees and prices that are anti-competitive.

TLSC/Texas ROSE assert that the switch-hold mechanism allows REPs "to exploit the

consumer by charging fees and prices that are anti-competitive because the consumer is placed in

a monopoly position without the benefit of price protection."'t TLSC/Texas ROSE's assertion

could not be further from the truth. A switch-hold does not in any way abrogate the

Commission's customer protection rules. While a customer's ESI ID is on a switch-hold, the

REP of Record is required to provide non-discriminatory service and abide by all other customer

protection rules. When adopting the tampering rule, the Commission considered whether a

switch-hold disadvantages a customer with respect to price. In that proceeding, the Commission determined that a REP should have the discretion, with respect to an ESI ID on a switch-hold, to place the customer whose fixed-price contract expired on a default month-to-month product.22 The terms of the default product are mandated by P.U.C. SUBST. R. 25.475(e)(1). Further, the Commission's complaint process would be available to any customer who believes that the REP has taken inappropriate actions.

F. Issues raised by the Electric Reliability Council of Texas (ERCOT).

ERCOT takes exception to the last sentence of proposed P.U.C. SUBST.

R. 25.480(l)(3)(B), which states that ERCOT shall make information about ESI IDs with switch-holds accessible to all REPs on the secure area of the ERCOT website. ERCOT states that it does not have access to information about a customer's deferred payment plan and, thus, would be unable to perform this function.23 The REP Group understands that ERCOT would be posting

22 Rulenaaking Relating to Meter Tampering and Disconnection and Reconnection of Service for Customers with Advanced Meters, Project No. 37291, Staffs Proposed Order for Consideration at the April 1, 2010 Open Meeting at 10 (March 26, 2010).

(16)

information compiled by the TDU. As such, ERCOT would not need access to information

about a customer's deferred payment plan. However, the REP Group agrees that the sentence

referenced by ERCOT can be deleted because its level of specificity could limit the options for delivery of information when the stakeholders develop processes to implement the rule requirements.

25.480 (1)(3)(B) TDUs shall provide indication of which ESI IDs have switch holds so that

during a move-in enrollment a REP can identify whether a switch-hold applies and that

specific documentation must be submitted to have the switch-hold removed. €FC9T

shall make this infermatien accessible te all REPs on the seeure area of the ERCO

website.

ERCOT requests clarification on whether the timeline for a TDU's removal of a switch-hold in proposed subsection (1)(3)(C) will be the same timeline for removing a switch-switch-hold in the new meter tampering rule.24 If ERCOT is asking about the review of move-ins when a switch-hold applies to an ESI ID, the REP Group agrees that the same timeline for review should apply

whether the switch-hold is applied due to tampering or a payment plan. However, the REP

Group believes this issue is addressed by proposed P.U.C. SUBST. R. 25.480(l)(1)(E), rather than proposed subsection (1)(3)(C) referenced by ERCOT in its comments. In fact, proposed subsection (1)(1)(E) refers directly to the meter tampering rule by stating that "when the applicant for electric service is shown to be a new occupant not associated with the customer for which the switch-hold was imposed using the switch-hold process described in §25.126 of this title (relating to Adjustments Due to Meter Errors, Meter Tampering or Theft in Areas in Which Customer Choice is Available), the switch-hold flag shall be removed." Proposed P.U.C. SUBST. R. 25.480(l)(3)(C) should remain in the rule as proposed because it is intended to ensure that in the next TX SET release, when a switch-hold is in place on an ESI ID and there is a move-in

24 Id.

(17)

transaction, the move-in transaction can be held as pending in the system, rather than being initially rejected.

While reviewing the proposed rule in response to ERCOT's concerns, the REP Group

noticed that proposed subsection (1)(1)(F), which addresses removal of a switch-hold when a

move-in transaction is for an ESI ID subject to a continuous service agreement, should be modified to be consistent with the PUC Staff s proposal for adoption filed in Project No. 37291. 2_5 The REP Group offers the following modification:

25.480(1)(1)(F) For a move-in transaction sent by ERCOT indicating that the ESI ID is subject to a continuous service agreement, the TDU shall remove any switch-hold on that ESI ID and complete the move-in.

II. MANDATED PAYMENT PLANS

A. There is no need to mandate the payment plans year-round.

TLSC/Texas ROSE support the proposed changes to P.U.C. SUBST. R. 25.480(j) regarding the minimum down-payment and installment timelines for deferred payment plans26 because these changes will "increase the likelihood that low and moderate income families will be able to maintain electricity in their dwellings."27 TLSC/Texas ROSE also acknowledge that the proposed rule "broadens the categories of consumers who qualify for mandatory deferred

25 Rulemaking Relating to Meter Tampering and Disconnection and Reconnection of Service for Customers with Advanced Meters, Project No. 37291, Staffs Proposed Order for Consideration at the April 1, 2010 Open Meeting at 90 (subsection (h)(7)) (March 26, 2010).

26 Proposed P.U.C. SUBST. R. 25.480(j)(2)(B)(i) provides for an initial payment of 50 percent of the amount due with the remainder of the deferred amount to be paid in equal installments over at least five billing cycles unless the customer agrees to fewer installments.

''' Initial Comments of TLSC/Texas ROSE at 3. TLSC/Texas ROSE describes two benefits of the deferred payment plan structure: "First, it allows a larger down payment, thereby decreasing the amount to be recovered in the future. Second, it increases the number of installment payments which further decreases the additional monthly cost the consumer must repay in addition to his/her current electric bill." Id. at 15.

(18)

payment plans," and that the "categories added represent consumers who are most in need of

deferred payment plans and should be adopted."28

The REP Group agrees with TLSC/Texas ROSE that the proposed rule greatly expands the eligibility of payment plans to all low-income customers, all critical care customers, all chronic condition customers, and most customers who have not been disconnected in the prior 12

months during summer and winter months. The proposed rule also provides year-round

availability of level or average payment plans to all low-income customers, even if the customer is currently delinquent in payment to his REP at the time of establishing the level or average payment plan. In addition, the proposed rule provides year-round access to payment plans for all customers affected by an extreme weather event per P.U.C. SUBST. R. 25.480(i), and for all

customers affected by a Governor's declaration of disaster. All of these expanded protections

are part of the comprehensive solution that the Commission and stakeholders have been working

to achieve. The comprehensive solution must provide the right balance between ensuring

adequate protections for at-risk customer populations, especially in the summer and winter months, and limiting increases in bad debt costs that ultimately will be borne by customers who timely pay their electricity bills.

However, TLSC/Texas ROSE assert that in addition to these expanded eligibility protections, the Commission should mandate minimum payment standards for deferred payment plans voluntarily offered by REPs at any time during the year.29 The REP Group strongly disagrees; REPs should continue to have the flexibility to work with their customers to arrange deferred payment plans specific to their mutual needs. The rule should not specify the minimum

''g Id at 3. 29 Id.

(19)

down payment and number of installments for deferred payment plans that are outside of those

required by the rule for the summer and winter months.

B. The existing requirement in P.U.C. SuB57: R. 25.480 that customers are eligible for payment plans unless they have more than two disconnection notices should be maintained.

The REP Group agrees with Reliant that the existing criteria for determining eligibility for deferred payment plans based on whether the customer has had no more than two

disconnection notices in the previous 12 months works well and should be retained.30 The

proposed rule would base eligibility on whether the customer has had electric service physically

disconnected for non-payment during the previous 12 months. The REP Group also agrees with

Reliant that "[t]wo disconnection notices in three months is a strong indicator of a poor payment pattern,"' ^ and that the minimum, three-month requirement for a customer to have received electric service from their REP in order to be eligible for a deferred payment plan should be increased to six months.

Some comments suggest that credit worthiness should be based on a physical disconnection rather than on receipt of disconnection notices.32 These commenters point out that while over 900,000 disconnection notices are sent out during a month, only about 100,000 disconnections are actually completed.33 The REP Group cautions the provided statistics should not be interpreted to mean that 800,000 of the 900,000 customers who received disconnection notices ultimately paid the electricity bill before a physical disconnection was worked. In initial comments the REP Group provided the experience of one REP where approximately 40 percent

30 Initial Comments of Reliant at 12. " Id. at 133.

(20)

of unpaid final bills were from customers in the collections path who received a disconnection

notice and changed their REP before being disconnected.34

C. Proposed P.U.C. SuBS7: R. 25.480 should require reconciliation of level or average

payment plans "at least every 12 months. "

TLSC/Texas ROSE note that proposed P.U.C. SUBST. R. 25.480(h)(3) would require a

REP to true-up a level or average payment plan every six months. 35 The REP Group reiterates its initial comments that using 12 months, rather than six months, is better for customers. Providing the monthly calculations of the over or under balance for the same example that was included in the REP Group's initial comments, the chart below shows how the monthly over or under balance and payment amount is more volatile for a customer using a six-month reconciliation, as

compared to a 12-month reconciliation.

Like the example included in initial comments, this

example holds the price constant using a $5 customer charge and a 10 cent rate per kilowatt hour.

'; Initial Comments of the REP Group at 7. 35 Initial Comments of TLSC/Texas ROSE at 21.

(21)

Six-month Reconciliation

(Payment amounts and over/under amounts are shaded for comparison)

Description Jan Feb Mar Aar May Jun Jul AAcu S^e Oct Nov Dec

Year l

kWh 1,550 1,454 1,258 1,092 1,073 1,491 2,003 2,122 2,029 1,585 1,134 1,210 Electric Service 516000 515040 S13080 $114.20 $11230 515410 $205.30 $21720 $20790 0163.50 $11840 S12600

Twelve Month Sum $1,860 10

Balance Adjustment Under 50.00

Adjusted Budget Bill Amount ^' $155:01 $15501 5155.01 $15501 $15501 5155 01 L177.73

Balance Adjustment Over

Billed Amount

balance Oven/(Under( . . .$0,91 ($49,38) ($111.57),_.($16446) ($17295) , ...($ ($84.61),

Year 2

kWh 1,550 1,454 1,258 1,092 1,073 1,491 2,003 2,122 2,029 1,585 1,134 1,210 Electric Service $16000 S15040 $13080 $11420 $11230 $15410 $20530 $21720 $20790 $16350 $11840 $12600

Twelve Month Sum $1,860.10

Balance Adjustment Under 50.00

Adjusted Budget Bill Amount S17773 $17773 S17773 $17773 $177 73 $155.0f $15501 $15501 S15501 $15501 3155 01LIF777

Balance Adjustment Over f5 36 .34)1

Billed Amount 51 B.67

BalanceOver/(Under) ( $efi:68),. ($39,55) : $7,38. ',.$70.91 $136.34 .., 5391 ."..($49.38) '..($111.57) '.($164,^^ .(317295 `,($13C34 7.,($B461)'

Year 3

kWh 1,550 1,454 1,258 1,092 1,073 1,491 2,003 2,122 2,029 1.585 1,134 1,210

Electric Service $16000 $150.40 $13080 $11420 $11230 $15410 S20530 $21720 $20790 S16350 $11840 $12600

Twelve Month Sum 'a1,860 10 S

Balance Adjustment Under $0.00

Adjusted Budget Bill Amount $177 73 $177 73 S177 73 5177 73 S177 73 $155,01 $15501 $15501 $155 01 $155 01 $15501

Balance Adjustment Over ) ^ 136:3

Bflled Amount ^$18 67

BalanceOverl(Under) ($86.88) ($39.55) $7,38 . $70.91 .15136.34 780,91' ($49.38) (51i1.57) , -($16446) _,($17 7r. . r,5^36.34) 384,61j.

12-month Reconciliation

(Payment amounts and over/under amounts are shaded for comparison)

Description Jan Feb Mar AZ May Jun Jul Acu Sep Qc= Nov Dec

Year 1

kWh 1,550 1,454 1,258 1,092 1,073 1,491 2,003 2,122 2,029 1,585 1,134 1,210 Electric Service $16000 $15040 $13080 $11420 $11230 $15410 $20530 $21720 S20790 $16350 $11840 $126.00

Twelve Month Sum $1,860 10

Balance Adjustment Under $0.00

Budget Bill Amount $155,01 $15501 S155.01 $15501 $155.01 $15501 S155.01

BalanceOver/(Under) _ , . $0.91 (549.38j . ($111.57) .,($164.46) -...($172.95) 136.34) 07,33)`

Year

kWh 1,550 1,454 1,258 1.092 1,073 1,491 2,003 2,122 2,029 1,585 1,134 1,210 Electric Service $16000 $15040 $13080 $11420 $11230 $15410 $20530 $21720 S20790 $163.50 $116.40 $126.00

Balance Adjustment Under (50.02)

Adjusted Budget Bill Amount $15501 $15501 $15501 $15501 515501 ^ ^'^$75501' $15501 $15501 $15501 $15501 S155.01 $155.01

Balance Adjustment Over 80.00

Billed Amount $155 01

BalanceOverl(Under) ($112.32) ($107,71) (^$150) (S42.69). $0.02 $0.93 . ,($49,36). „($111.55). '($16444) ($17293) '.j$1,5^= ..($10731)

Year

kWh 1,550 1,454 1,258 1,092 1,073 1,491 2,003 2,122 2,029 1,585 1,134 1,210

Electric Service $16000 $150.40 S13080 S114.20 $11230 $15410 520530 $21720 320790 S16350 $11840 $12600

Balance Adjustment Under 0.00

Adjusted Budget Bill Amount $15501 S155.01 $15501 $15501 $155.01 .: $155.01 $15501 $15501 $15501 5155.01 5155.01 3155.01

Balance Adjustment Over ($0.04)

Billed Amount $15497

(22)

III. DISCONNECTION FOR NON-PAYMENT

A. Existing rules, TDU tariffs, and proposed P. U. C. SuBST R. 25.483 already address medical

emergencies referenced in PURA.$ 39.101(a)(1).

PURA §39.101(a)(1) states that the Commission is to ensure that retail customers are entitled to "safe, reliable, and reasonably priced electricity, including protection against service disconnections in an extreme weather emergency as provided by Subsection (h) or in cases of medical emergency or nonpayment for unrelated services ...." Some commenters imply that this PURA provision completely prohibits the disconnection of certain customers, namely critical care customers.36 However, this is not the case. The Commission has correctly interpreted its authority under PURA § 39.101 to allow for the disconnection of critical care customers, so long as such disconnections are performed with proper precautions. Specifically, the Commission's current disconnection rules allow for the disconnection of critical care customers subject to certain guidelines.

To interpret PURA § 39.101 in the manner advocated by some commenters in this proceeding would lead to the erroneous conclusion that critical care customers do not have any obligations with respect to electric service because, regardless of their actions, they cannot be disconnected. The Commission has specifically rejected this interpretation by providing in the current version of P.U.C. SUBST. R. 25.497(c) that critical care customers are still obligated to

pay their REPs for service received and "may qualify for deferral of disconnection." A deferral

of disconnection is very different from complete exclusion from the competitive market's disconnection process. Thus, the rule modifications proposed in this rulemaking comport with the requirements of PURA § 39.101(a)(1).

36 See, e.g., Initial Comments of TLSC/Texas ROSE at 24-25; Initial Comments of AARP at 4; Initial

Comments of National Multiple Sclerosis Society: Lone Star Chapter at 2 (May 7, 2010).

(23)

Contrary to the City of Houston's belief that the proposed rules lower protections for

critical care customers,37 the rule modifications included in proposed P.U.C. SuBST. R. 25.483 and in Rulemaking Proceeding to Amend Customer Protection Rules Relating to the âesignation

of Critical Care Customers, Project 37622, will actually provide stronger protections for critical

care customers: (1) the use of two designations - critical care and chronic condition - will

actually increase the number of customers eligible for protection; (2) critical care designation

will last for two years rather than one year; (3) an extended disconnection notice period of 21 days will be provided to critical care customers; (4) all critical care and chronic condition residential customers will be eligible for extended deferred payment plans and level or average payment plans; and (5) secondary emergency contacts will be contacted prior to disconnection to

ensure that appropriate accommodations are made for the affected customer. It is interesting to

note that the City of Houston, with its own treasury, is advocating state policies in this rulemaking proceeding, but has not offered to come forward with government assistance to address this societal issue and provide the necessary bill payment assistance to financially-challenged critical care customers in its municipal area. Taken together, the instant rulemaking and Project No. 37622 are wholly appropriate.

There are also existing Commission rules and tariff provisions that protect these

vulnerable customers. P.U.C. SUBST. R. 25.480(g) requires REPs to inform customers who

express an inability to pay about all payments options and payment assistance programs. Critical care customers may be eligible for such assistance, and P.U.C. SUBST. R. 25.483(h) provides that REPs are not to authorize a disconnection when a pledge is received from an energy assistance agency and must give the agency 45 days to honor the pledge. These sections of existing P.U.C. SUBST. R. 25.480 and 25.483 are not changing, and REPs will continue to work with energy '' City of Houston Comments at 6 (May 6, 2010).

(24)

assistance agencies to ensure that vulnerable customers have payment options. These agencies are often on the "front lines" and are in the best position to assist vulnerable customers.

The standard retail delivery tariff applicable to all TDUs also provides protections to medically vulnerable customers. Section 4.3.9.1 requires the TDUs and REPs to ensure that a customer's critical care designation is properly identified in the competitive market's systems. 38

Further, Section 5.3.7.4 states: "[TDU shall not perform a disconnection] when such

disconnection will cause a dangerous or life-threatening condition on that Retail Customer's premises, without prior notice of reasonable length such that Retail Customer can ameliorate the

condition. Retail Customer is responsible for notifying its designated Competitive Retailer if a

disconnection to its facility will result in such a condition." Section 5.3.7.3, requires that these customers are to have their service restored as soon as possible following the alleviation of the

cause of the disconnection. In other words, the tariff provides additional stopgaps to ensure that

critical care customers have service restored as soon as possible and are not inappropriately disconnected. It is anticipated that these tariff sections will need to be revised once the new rules

are adopted in Projects No. 36131 and 37622

The REPs look forward to working with all

stakeholders on drafting new tariff language.

B. On balance, the changes in the proposed rule would provide generous protections for Texas customers, including critical care customers.

In their initial comments, TLSC/Texas ROSE claim that adoption of this rule would place

Texas among the states with the weakest protections for critical care customers.34 The REP

Coalition submits that TLSC/Texas ROSE's claim is unfounded. Specifically, TLSC/Texas

3 S See Pro-Forma Retail Delivery Service Tariff set forth in P.U.C. SUBST. R. 25.214(d)(1).

'9 Initial Comments of TLSC/Texas ROSE at 27.

(25)

ROSE's citation to six states out of 50 from the LIHEAP Clearinghouse website40 as support for their claim is simply not enough of a sample to make a valid conclusion. Further, the REP Coalition submits that a conclusion of where Texas ranks with respect to other states in terms of protection of critical care customers can only be made after a careful review of each state's

relevant regulations and utility commission actions. Moreover, limited comparisons should not

be used to diminish the significance of the protections offered by the proposed rule.

The proposed rule would greatly increase the protections afforded to all customers,

including critical care customers, in times when these protections are needed the most. Specifically, while PURA and the Commission's rules already prohibit disconnection in cases of extreme weather, 41 this rulemaking would add additional protections that would help customers avoid disconnections during the summer and winter months. Moreover, the proposed rule would

include year-round protections in the case of a governor's declaration of disaster and year-round

availability of level or average payment plans to all low-income customers, even if the customer is currently delinquent in payment to his REP at the time of establishing the level or average payment plan. The REP Group maintains that the critical care, disconnection for nonpayment, and payment plan provisions under discussion in this rulemaking and in Project No. 37622 must be considered in concert as they offer a package of protections that benefit a broad group of customers and offer bad debt relief to REPs - two objectives that TLSC/Texas ROSE expressly supported in their comments.42

TLSC/Texas ROSE state: "We do believe that all consumers should be responsible for

paying for the electricity they use. However, this is not always possible. Instead of 40 http://www.lilieap.ncat.org/Disconnect/disconnect.htm

" See PURA § 39.101; P.U.C. SUBST. R. 25.283(i).

42 Initial Comments of TLSC/Texas ROSE at 28 ("[W]e fully support both objectives of providing payment flexibility and reducing bad debt for REPs.")

(26)

disconnecting critical care customers, efforts should be made to protect them from harm while

making as much assistance available as possible."43 TLSC/Texas ROSE also state: `'Billing

assistance programs should be targeted toward critical care customers."44 TLSC/Texas ROSE's

statements highlight the important, but difficult, task of addressing the complex issues that surround service to critical care customers. The REP Group maintains that a long-term solution for service to this vulnerable group can only be achieved through market-wide efforts, coupled with Legislative-approved program assistance. The REP Group shares the sentiment of above-quoted TLSC/Texas ROSE statements and believes that those remarks go directly to what the REPs and consumer groups have tirelessly advocated for in every Legislative session - use of the System Benefit Fund (SBF) for what it was intended.

Without a legislative solution, the Commission has appropriately taken responsibility for addressing the needs of vulnerable customers within the context of a comprehensive solution --mindful of the need to balance protections with the financial exposure to REPs. The proposed rule significantly enhances the current protections for critical care customers, provides protections for a new category of chronic care customers, and improves and streamlines the application and renewal processes for these customers.

C. TDUs should share responsibility for servinQ critical care customers.

The REP Group agrees with the Joint TDUs that the continuous provision of electric service to critical care customers is a difficult societal issue that should be considered by the Texas Legislature. In the meantime, TDUs and REPs should share financial responsibility for serving these vulnerable customers. The Joint TDUs imply that because proposed P.U.C. SUBST.

a:> Id. aa Id.

(27)

R. 25.483(g)(4) "penalizes" TDUs for "refusing" to disconnect a customer, the wrong incentive would be placed on the TDUs.4' The REP Group disagrees - proposed subsection (g)(4) is about

sharing responsibility for serving vulnerable customers. The REP Group agrees with the Joint

TDUs that "[i]t is in no one's interest to disconnect service to such a customer if doing so may jeopardize the life of the customer."46 Because REPs rely on TDUs to perform certain functions, such as performing disconnections, TDUs and REPs should share in the financial responsibility

when such functions cannot be performed.

The Joint TDUs opine that PURA § 39.107(d) requires TDUs to bill REPs for non-bypassable delivery charges and requires REPs to pay such charges.47 However, the REP Group believes that in implementing PURA § 39.107, the Commission may specify the non-bypassable charges to be billed. The Joint TDUs also state that TDUs serve as the agents to bill and collect

transition charges.48 If the Commission determines that transition charges must be billed

pursuant to the financing orders, then those transition charges should be the only charges billed when a critical care customer cannot be disconnected for non-payment.

The REP Group reiterates its initial comments that proposed subsection (g)(4) should reference the Delivery Services Tariff, rather than referring to a TDU's "refusal" to disconnect. The tariff includes very appropriate language instructing the TDU not to disconnect a customer, without prior notice of reasonable length such that the retail customer can ameliorate the condition, if the disconnection will cause a dangerous or life-threatening condition on the customer's premises.

as

Joint TDU Comments on Proposals for Publication of Repeal of § 25.497 and New § 25.497 and

Amendments to §§ 25.454, 25.480, and 25.483 at 18 (May 6, 2010).

46 id.

`" id.

(28)

25.483(g)(4) If the TLr refti ses to disconnect ^~:.;^^i^ cafe :ao^.:'i eustemef "* to

this subsection, it disconnection is delayed beyond the completion date required by the timelines set forth in the TDU's Discretionary Charges tariff, the TDU shall cease charging all transmission and distribution aand surcharges for

that premise to the REP.

D. Customers should be allowed to select e-mail as the delivery method for disconnection

notices.

The Steering Committee of Cities Served by Oncor (Cities) asserts that customers should

receive disconnection notices by both email and a separate mailing or hand delivered letter. 49

Cities makes this assertion regardless of whether the customer has elected to receive

communications from the REP by e-mail. Cities claims that customers may not receive email

notices because they have not paid their home internet bill or are having maintenance/technical issues with their service at home.

The REP Group disagrees with Cities and believes that the customer's desire to receive communication from the REP by e-mail should be honored when a customer affirmatively chooses such communication. Many customers who elect to receive communications by e-mail do so with the explicit understanding and desire not to receive paper copies of notices or bills. By telling the REP that he wants communications by email, the customer is telling the REP that

e-mail is be best method to make contact about important matters, such as billing notices and

disconnection notices. Additionally, Cities' arguments about e-mail accessibility are overstated. There are myriad ways to check one's e-mail: at work, at the library, at an apartment's business center, at a friend's house, and even on one's cell phone. Thus, if the customer so requests, REPs should be permitted to notify customers by e-mail only.

49 Initial Comments of Cities at 7-8.

(29)

IV. OTHER ISSUES

A. The proposal to send three notices per year is not reasonable.

The REP Group agrees with Reliant that the number of notices to residential customers about critical care protections and the availability of the LITE-UP discount should be limited to twice per year. 50 As Reliant points out, the automatic enrollment of LITE-UP eligible customers vastly reduces the number of customers who can be expected to take action as a result of receiving a third notice. Customers also learn about LITE-UP through the Commission's public service radio advertisements. Additionally, new customers are informed of LITE-UP and critical care protections through their REPs' Terms of Service and Your Rights as a Customer

documents. Therefore, the REP Coalition believes that combining the notice of critical care

protections with the existing twice annual LITE-UP notification provides an adequate and reasonably cost-effective notice to customers of these protections.

B. Payment due dates should not be extended to 25 days from issuance of bill.

The REP Group maintains that the "not less than 16 days after issuance" bill payment due date set forth in the current version of P.U.C. SUBST. R. 25.480(b) continues to be appropriate for

the market. TLSC/Texas ROSE suggest that the Commission increase the payment due date

from the current 16 days from bill issuance to 25 days. 51 Alternatively, TLSC/Texas ROSE

propose requiring REPs to allow customers to choose the due date for their billing. 52 These proposals are similar to proposals made by consumer groups in the initial customer protection

so Initial Comments of Reliant at 7.

51 Initial Comments of TLSC/Texas ROSE at 14-15.

(30)

rulemaking in 2000 that were rejected by the Commission. 53 The REP Group encourages the Commission to again reject these proposals.

The TLSC/Texas ROSE proposal to increase the due date to 25 days from bill issuance

would add over 50 percent more days to the due date requirement now in place in the

competitive service areas within ERCOT. Thus, if this proposal were adopted, customers in competitive areas would have 50 percent more days to remit payment than would customers in

areas of the State not yet open to competition.

Competitive REPs should not be required to

provide a customer more days to pay their electric bills than is required in the regulated

environment. Moreover, REPs generally sell electricity on credit and provide 65 to 80 days of

service before being allowed to disconnect a customer for non-payment. In this post-pay model for selling electricity, REPs should not be required to extend credit for a longer period of time than is already required by the 16-day due date.

Because the TLSC/Texas ROSE proposal, if adopted, would impose significantly higher risks upon REPs, at the very least customer deposit amounts would need to increase accordingly to offset the potential impact from additional bad debt. Specifically, the existing deposit rules allow a REP to collect up to one-fifth of the customer's estimated annual billing, or the sum of the estimated billing for the next two months.'4 This deposit cap was set by the Commission with a 16-day due date as the basis of the formula. Consequently, the additional nine days posed by a 25-day due date would increase the risk to the REP and would need to be reflected in the deposit cap.

53 PUC Rulemaking Proceeding for Customer Protection Rules for Electric Restructuring Implementing SB7 and SB 86, Project No. 22255, Order Adopting New Subchapter R, Customer Protection Rules for Retail Electric Service, in Chapter 25 as Approved at the December 7, 2000 Open Meeting at 138-139 (Dec. 20, 2000).

54 P U.C. SUBST. R. 25.478(e)(1).

(31)

TLSC/Texas ROSE state that changing the due date to 25 days for bill issuance would match the new federal standards for consumer payments on credit cards." While this may be the requirement for credit card companies, the significant differences between the credit card and electric service industries explain why these industries should not share the same bill payment deadline. The longer payment deadline (i.e., 25 days versus 16 days) makes sense for credit card companies, which have stronger available methods to protect extensions of credit. For instance,

banks and credit card companies may choose to deny an extension of credit; whereas, the

proposed rule mandates that REPs extend credit beyond the 65-80 days of credit that already exists in the normal post-pay model of selling electricity. In addition, credit card companies may: (1) increase the interest charges for existing balances and new transactions at any time if payment is not received within a certain number of days after the payment due date; (2) may increase interest charges for new transactions; and (3) may offer no grace period for repayment of the balance for purchases if the previous balance was not paid in full by the due date, Collectively, these differences help to explain why the 16-day payment deadline should remain unchanged within the context of retail electric service.

TLSC/Texas ROSE alternatively suggest that REPs be required to let customers choose their own bill due date, stating that many banks and other lenders let customers choose the date

on which loan payment are due. 56 If a customer chooses to have his house payment come due on

a day of the month that requires a lender to defer receipt of the payment, the lender can charge

that consumer interest on the extension. REPs do not have that same option available to them.

Even so, some REPs offer plans that allow customers to choose their own due date.. Because of competition, REPs have the incentive to work with their customers to design products and

5' Initial Comments of TLSC/Texas ROSE at 14.

(32)

services that meet a customer's needs. These types of payment arrangements should continue to be left to the competitive market and should not be mandated by Commission rule.

Finally, the REP Group does not believe all customers should absorb the increased costs that would be required to extend payment due dates as proposed. For the reasons discussed above, the TLSC/Texas ROSE proposed changes should be rejected.

V. CONCLUSION

The REP Group appreciates the opportunity to comment in this complex proceeding, and appreciates the Commission's efforts to balance the interests of REPs and vulnerable consumers. These are difficult and sensitive issues, and the REP Group believes that a comprehensive solution is the most appropriate means of achieving an optimal balance that will enhance existing customer protections for vulnerable populations and reduce bad debt faced by REPs with the goal of facilitating competition in the retail electric marketplace.

Respectfully submitted on behalf of the REP Group,

/ ~

Stephen J. Davis

State Bar No. 05547750

LAW OFFICES OF STEPHEN J. DAVIS, P.C. 701 Brazos, Suite 970

Austin, Texas 78701 (512) 479-9995

Control Number : 36131