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Texas Market Update

PUBLIC UTILITIES COMMISSION OF TEXAS UPDATE

PUCT Publishes Proposed REP Certification Rule for Comment
Commissioners approved the PUCT Staff’s Proposal for Publication in the Rulemaking Relating to Retail Electric Provider (REP) Certification, which, if approved, would significantly increase the minimum financial resources and technical requirements for REP certification in Texas. 

The proposed rule would significantly increase certain REP financial standards over the current minimum threshold of unused cash resources of at least $100,000, by requiring non-investment grade REPs to meet minimum capital requirements of between $1-3 million, depending on years served in the Texas market.  Direct Energy—a wholly-owned subsidiary of Centrica, plc, who has been assigned an A- credit rating by Standard and Poor’s—is well-positioned, since we would not need to change our current credit position if the rule is adopted in its current form.

In deliberations, the Commissioners discussed the need for the standards in this rule to be strong in order to reduce the risk of REP insolvency and achieve its goal of customer protection, without unnecessarily forcing existing REPs out of the market.  This case is particularly important as it represents a potential precedent that could be exported to other states regarding competitive retailer credit requirements. 

Initial comments on the proposal are due Dec. 8.  Reply comments are due Dec 22.  The Commission will conduct a public hearing on this rulemaking on Dec. 30, 2008.


Parties File Reply Comments on Proposed Information Disclosure Rule
Parties, including Direct Energy, filed reply comments on the Commission’s proposed rule that seeks to ensure that appropriate customer disclosure requirements for retail electric providers’ (REPs') products are in place for the competitive retail electricity market.

This proposed rule would provide regulatory certainty, clarity and consistency so that REPs compete in a fair marketplace, and it could help to increase customer understanding of the products they are buying.

The Commission allows standard protections under the Commission’s rules to be waived for customers with loads in excess of 50 kW.


PUCT Staff Prepares Proposed POLR Rule
In response to concerns addressed this summer as a result of several REP defaults, PUCT Staff has opened a rulemaking to review various aspects of the existing Provider of Last Resort (POLR) rule. The PUCT Staff is expected to have a proposed POLR rule in front of the Commission at the Open Meeting on Nov. 5. 

Direct Energy is actively advocating that the new rule retain the current pricing methodology and structure for POLR service, in order for POLR REPs to be appropriately compensated for the costs and risks inherent in providing POLR service and to prevent interference with the competitive market. Direct Energy has also discussed with PUCT Staff the need for incentives—not mandates—for POLR REPs to bypass the application of the POLR rate to transitioned customers through voluntary price options or competitive service rates that offer a price that is lower than the applicable POLR rate. 

For previous articles on the POLR rulemaking workshop that took place a month ago, please click here.


PUCT Issues POLR Designations for 2009-2010 POLR Term
The PUCT Staff issued its final report with regard to the selection and designation of eligible, non-volunteer and volunteer POLRs for the 2009-2010 term. Direct Energy Business/CPL Retail/WTU Retail was designated as a non-volunteer POLR in the following classes/areas:

In addition, Strategic Energy* (now Direct Energy Business) was designated as a non-volunteer POLR in the following classes/areas:

Direct Energy/CPL Retail/WTU Retail was also approved as a volunteer POLR for the residential and small non-residential classes in each POLR territory. Other REPs volunteering for POLR service include Reliant Energy (residential only in all service areas), TXU Energy (residential, small non-residential and medium non-residential in all service areas), MxEnergy (small non-residential in the CenterPoint and AEP Texas North service areas), and Constellation (medium non-residential in all service areas).  The number of POLR customers committed to by each volunteer is confidential.

* The filings were made prior to September 1.  As a result, Strategic Energy and Direct Energy were reviewed individually and given separate designations. As of now, there are separate designations for each entity but it is possible in the future that the commitments may be combined.  

 

 

 


PUCT Grants Extension of Emergency Rule Waivers to CenterPoint
The Public Utility Commission of Texas (PUCT) has approved an extension of waivers of certain rules and tariff provisions for CenterPoint in order to give them additional time to return to normal operations post-Hurricane Ike.  The extension runs through Nov. 6, 2008, and applies to specific waivers of the Transmission and Distribution Utility (TDU’s) performance measures related to standard timeframes for completion of field work transactions.

The PUCT has also sent a proposed rule for publication on an expedited timeframe concerning waving the “smoothing requirement” for certain counties impacted by Hurricane Ike.  The proposed new rule will result in more accurate estimates of electric consumption and more accurate bills for customers for whom Hurricane Ike prevented meters from being read.

For previous information on this topic, click here.


Commerce Energy Sells Texas Retail Electric Business for $14.8 Million
Commerce Energy Group, Inc. announced that its principal operating subsidiary, Commerce Energy, Inc., sold all of its retail electric service contracts in Texas to Ambit Energy, LP (Ambit), for an estimated $14.8 million. The purchase price includes $8.5 million in cash received on closing; a second payment of $2.7 million, reduced by customer deposits and adjusted for final customer count, to be received on or before Nov. 24, 2008; and deferred payments over a 24-month period estimated to be $3.6 million.

Commerce serves approximately 55,000 residential, 5,000 small commercial, and 2,000 large commercial customers in Texas.  Commerce will retain its business providing retail electric power and natural gas in other markets in which it currently operates.


Reliant Files for New REP Certificates
Reliant Energy applied for two new Retail Electric Provider (REP) certificates for the following legal entities: Reliant Energy Texas Retail, LLC and Reliant Energy Services Texas, LLC.  Reliant has indicated that it may use the new certificates to transition some or all Reliant customers to facilitate the unwinding of Reliant's Merrill Lynch Credit Sleeve and Reimbursement Agreement.  The method used to demonstrate minimum credit standards for REP certification under these new applications would be assets in excess of liabilities of at least $50,000,000. Reliant’s current REP certificates meet financial certification standards by virtue of an investment-grade rating.


ERCOT UPDATE

Briefs on the Latest ERCOT Action Items:

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