Written on: August 10, 2016
AUSTIN — Although supported by utility monopolies, overhauling the state’s procedures for setting home electric rates would lead to higher prices for costumers, more paperwork for regulators and cause big headaches for retail electric providers.
Those were some of the conclusions from customer representatives, retail electric providers and others who testified during a special Public Utility Commission hearing on “alternative rate-making” on Wednesday. At the behest of the state lawmakers, the PUC is studying potential alternatives to its current rate-setting procedures and will file a report on its findings in January.
The potential rate-making revisions considered Wednesday had been enumerated earlier in a special white paper report commissioned by the PUC, and released in May. That report included “formula rate plan” proposals and others that public utility monopolies have long sought in their lobbying efforts at the Texas Legislature.
But critics noted that the main impact of many of the changes would be to increase utility revenues at the expense of customers. Critics also warn of unforeseen setbacks both for electric customers and non-utility businesses if the Legislature or the PUC follows through with such changes.
Steve Davis, an attorney for the Alliance of Retail Markets, told PUC commissioners on Wednesday that some of the contemplated changes would increase customer complaints. Our coalition “believes the (white paper) report offers remedies in search of a problem — there is nothing in the current paradigm that is broken in any respect,” he said.
Katie Coleman, an attorney with a coalition of Texas industrial consumers, said the contemplated changes would shift financial risks from monopoly utilities to electric customers. “These types of processes deprive ratepayers of rate certainty and that’s important to business,” she said.
Besides “formula rate plans” (in which rates are adjusted automatically to keep utility revenues within a specified band), other alternative rate-making schemes identified in the white paper include “straight fixed-variable rate” plans (in which utilities recoup their fixed costs through per-customer charges that are independent of the volume of electricity consumed) and “lost-revenue adjustment mechanisms” (in which rates can be adjusted periodically to compensate the utility for lost revenues resulting from consumer conservation).
Other alternatives identified in the white paper include “revenue decoupling” and “price-cap” plans.
Some of the proposals were greeted enthusiastically by utility officials, including the proposal for a formula rate plan. One official testifying Wednesday said a formula rate plan adopted recently in Arkansas “resulted in a credit ranking upgrade (for the utility) and will result in a more constructive relationship in that state.”
The PUC is accepting public testimony on the issue through Aug. 24. More information about the ongoing discussions can be found at the PUC website, in docket 46046, found here.
R.A. Dyer is a policy analyst for TCAP, a coalition of more than 170 cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.