Last meeting I filed a memo which addressed the voluntary deferred payment programs presently offered by several retail electric providers (REPs), the current PUCT rules relating to the disconnection of power for the ill, disabled, and critical care customers, and the increase of the discount factor used this summer for low-income assistance from the System Benefit Fund (SBF). With this memo I’ll elaborate a little on those points as well as address the two petitions that are docketed on the agenda for this Open Meeting.
Since the last open meeting, two additional REPs– Gexa Energy and Stream Energy have begun offering voluntary programs that allow low income and/or elderly customers to avoid disconnection for the remainder of this summer by paying minimal amounts on their bills. (A third, Green Mountain Energy, will be announcing a deferred payment plan today or tomorrow.) With their addition to the three which are already offering such programs, TXU Energy, Reliant, and Direct, over 85% of low income residential customers in the competitive retail areas of ERCOT are covered by these voluntary programs. This, in my opinion, is how a market should work with retailers differentiating themselves based upon the products, service, and price that each offers. If you are with a REP that is not presently offering disconnection protection for this summer and this is a service that is important to you, then I advise you to switch to one of the five (soon six) REPs that are offering the service.
As I previously wrote, there are numerous protections against disconnection found in the PUC’s Substantive Rules. Since last meeting, some have suggested that “critical care” customers really are not protected from disconnection. I firmly disagree. PUC Subst. Rule 25.497 speaks directly to the additional requirements that REPs and Transmission and Distribution Utilities (TDUs) must meet to address disconnection issues for critical care customers. However, market participants often go far beyond these rules, with some companies having additional, internal prerequisites that must be met before a customer is disconnected, while other companies go the extreme and will not disconnect critical care customers. Therefore, the assertion that critical care customers are not protected is erroneous.
As most of you know, the SBF money was not appropriated for the summer 2006. The absence of that money was one of the reasons the Commission adopted Project No. 32874 relating to the disconnection of electric service for that summer. For the summers of 2007, 2008, and 2009, the SBF has been funded. The presence of this money was one of the reasons that the Commission denied the petition for emergency rule making in Project No. 34400, last summer.
On July 9, 2008, the Commission approved an order, in Project No. 28073, setting the discount rate based upon current POLR rates rather than upon the minimum POLR rate. Calculating the discount factor in such a way required a “good-cause” exception to PUC Subst. R. 25.454(e), and resulted in a significantly higher discount for low-income customers. Based upon our calculations, the average discount per participant, beginning in July of 2008, should be almost double what it was in the summer of 2007.
Regarding the two petitions filed requesting adoption of an emergency rule prohibiting disconnection for the remainder of this summer; I am reminded of my memo of two summers ago in Project No. 32874. Once again the Office of Public Utility Counsel (OPC), joined by Texas “ROSE”, Texas Legal Services Center, and two state representatives, has filed a petition that would cover a staggeringly large number of people-to wit, every residential customer in ERCOT, nearly five and a half million of them. Passing such a petition would be bad public policy for many reasons, but allow me to focus on three of them.
First, Texas is home to many people with the financial means to pay their electricity bill on time. Does octogenarian billionaire T. Boone Pickens really need to be protected by OPC?
Second, many low-income and /or elderly customers, who availed themselves of the 2006 Commission ordered moratorium, accumulated large balances that came due in October through February which they found difficult if not impossible to pay. For example (using numbers supplied to me by one of the REPs), if a low income elderly customer had bills in July, August, and September of $265, $258, and $194, respectively, and chose to defer 100% of those bills, their new bills in October, November, December, January, and February, would be $284, $269, $306, $314, and $282, respectively. In each month, beginning in October, the new bill is higher than the monthly bills the customer apparently couldn’t pay back in the summer. In other words, on top of the normal bills due in the fall and winter, this customer also has to pay cumulatively $717 deferred from the summer. It is hard to understand how we could consider this program to be “helping” the customer.
Third, low prices in the competitive retail market are a result of robust competition. While it is not the Commission’s job to insure a REP’s viability and profitability, it is also not right for us to foist obligations on a REP which will result in substantial losses. We know from the experience in the summer of 2006 that the REP community collectively wrote off millions of dollars in “uncollectible” bills. This happened because many customers, who had been given a deferred payment plan, switched away to another REP without first paying off their bill to the REP who gave them credit (on average, customers who engaged in this practice in 2006 left their REP with an unpaid bill of about $900.) In my opinion, any deferred payment plan must have as a component a commitment from the customer to pay off the deferred amount.
Lastly, let me comment about the typical weather in September in Texas. Contrary to some assertions, August, not September, is the hottest month of the year; September is not even normally the second hottest month of the year. According to information supplied to me by ERCOT, over the last eight summers (2000 through 2007), September peak electricity dem and (a good proxy for air conditioning usage, and therefore heat) was less than either August, July, or June, for four of the last eight summers; in fact, for one summer (2003), September was the coolest of the five summer months. (And, as you can see on the accompanying charts, temperatures since mid August of this year have been below normal.) Don’t get me wrong, September in Texas doesn’t feel like Colorado. However, it is fair to say that once we get through August, the summer is just about over.
There is no question that certain classes of customers should be protected from disconnections during critical summer months and this summer several REPs have “stepped up” to do so. While many customers accept their responsibility and pay off the deferred amounts after receiving the benefits of the program, any proposed mandated solution to the summer disconnection issue must not allow the deferred payment customer to avoid paying their bills. A rule on this problem should be specific in the populations that it is meant to protect, and should require that participants in the plans meet their obligations. Therefore, I propose that the Commission open a rulemaking to address these issues and do so in a deliberate and orderly fashion.