BILL ANALYSIS

 

 

†††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††† C.S.S.B. 482

††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††† By: Fraser

†††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††† Regulated Industries

††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††† Committee Report (Substituted)

 

 

 

BACKGROUND AND PURPOSE

 

Current law provides for the opening of the Texas electricity market for competition, resulting in customers in different segments of the market exercising their ability to choose a new provider of electricity.† However, the lack of competitive forces in the residential market has led to increased electricity prices and little customer mobility between providers.† During the recent past, retail electricity prices increased with the increase in the price of natural gas, the primary source of fuel for electricity generation in Texas.† However, when natural gas prices fell, electricity prices did not, and customers did not switch companies in response to the price increase.

 

It has become necessary to further competition in the retail electricity market by encouraging competitive activity among retail electric providers.† Additionally, it has become necessary to target, educate and assist customers on the legacy price to beat to switch plans or providers to reduce their electric bills.

 

RULEMAKING AUTHORITY

 

It is the opinion of the committee that rulemaking authority is expressly granted to the Public Utility Commission in SECTION 4 of this bill.

 

ANALYSIS

 

SECTION 1.† Amends Sections 17.157(a) and (b), Utilities Code, by delineating that the Public Utility Commissionís authority related to customer disputes applies only to residential customers and by adding language that allows the commission to investigate residential retail customer disputes in addition to resolving such disputes.

 

SECTION 2.† Adds new Section 39.051(h), Utilities Code, which requires that, on or before January 1, 2008, an electric utility and the competitive affiliates of the utility that were created pursuant to the separation requirements of Section 39.051 and that are owned by a common holding company each shall have a name and logo that is distinct from the name and logo of each of the other entities owned by the common holding company and distinct from the name and logo of the common holding company, have its board of directors composed exclusively of individuals who are not members of the board of directors of any of the other entities owned by the common holding company and are not members of the board of the common holding company, have a chief executive officer only of that entity, and have its headquarters located in a building separate and apart from the building or buildings in which the headquarters of any of the other entities owned by the common holding company is located or in which the headquarters of the common holding company is located.† In addition, the utility and the competitive affiliates each shall maintain an armís-length relationship with the other entities owned by the common holding company and shall enter into transactions with another entity owned by the common holding company only on a commercially reasonable basis and only as approved by a majority of the directors of its governing board of directors.† This section also requires the utility and the competitive affiliates to each prepare its separate annual financial statement in accordance with generally accepted accounting principles showing its assets and liabilities as separate and distinct from the assets of the other entities owned by the common holding company and to each ensure that the commission has complete access to all of the entityís books and records pertaining to transactions between the entity and another entity owned by the common holding company.†

 

SECTION 3.† Adds new Section 39.101(i), Utilities Code, which prohibits a retail electric provider from stating or implying that it can provide better reliability of electric service or preferential treatment in service restoration than another provider.† Permits the provider to make claims about ďcustomer service reliability.Ē† Authorizes the Public Utility Commission to impose a penalty for a violation of Subsection (i), and requires that such a violation be included in the Commissionís highest class of violation.

 

SECTION 4.† Amends Subchapter C, Chapter 39, Utilities Code, by adding Section 39.110, which promotes residential customer choice by imposing a charge for the next three years on certain retail electric providers that do not meet a specified annual target for gaining residential customers outside their traditional service territory. The charge applies to retail electric providers with more than 250,000 residential customers that on December 31, 2006 were required to offer the price to beat to residential customers and to any successors in interest to such retail electric providers.† To avoid paying the charge, a retail electric provider with more than a million residential customers must gain 90,000 or more residential customers a year outside its traditional service territory, except that the provider may avoid the charge in the third year by meeting the target gain in customers for both of the first two years.† To avoid paying the charge, a retail electric provider with less than a million but more than 250,000 residential customers must gain 45,000 or more residential customers a year outside its traditional service territory, except that the provider may avoid the charge in the third year by meeting the target for both of the first two years.† The gain in customers in a calendar year is measured by move-in and switch transactions processed by the independent organization for the provider in areas outside the providerís traditional service territory. Residential customers gained by a provider that was an affiliate of the retail electric provider on December 31, 2006 count toward meeting the target.

 

If the target is not met, the annual charge is calculated by subtracting the number of residential customers the affiliated retail electric provider gains outside its traditional service territory from the target and multiplying by $100 on December 31, 2007, $200 on December 31, 2008, and $300 on December 31, 2009.

 

Unless funds are not appropriated from the system benefit fund sufficient to provide a 10 percent discount to low-income electric customers as provided by Section 39.903(h), the money collected from any charge assessed for not meeting the target residential customer gains are to be used to fund a Public Utility Commission customer education program for residential customers, including the provision of a call center.† If† funds are not appropriated from the system benefit fund sufficient to provide a 10 percent discount to low-income electric customers, the money collected for any charge shall be used first to assist low-income electric customers by providing a 10 percent reduced rate and then for a residential customer education program, including the provision of a call center.

 

The commission may adopt rules as necessary or appropriate to carry out Section 39.110.

 

Section 39.110 as added by this Act expires March 31, 2010.

 

SECTION 5.† Adds new Section 39.2021 to Subchapter E, Chapter 39, Utilities Code, which requires that until March 1, 2008, a retail electric provider who served residential customers under a price to beat tariff on December 31, 2006, shall assist such customers who have not affirmatively chosen an electric service plan in choosing an alternative plan offered by the provider.† The section defines ďresidential customers under a price to beat tariff on December 31, 2006Ē. After March 1, 2008, the retail electric provider may provide a ballot to such residential customers who have not affirmatively chosen a service plan to allow the customer to choose another plan.† The ballot describes the alternative plans the provider offers and allows the residential customer to choose a particular alternative plan.† The ballot shall include a statement as specified in this section.† For a residential customer that does not choose a plan through the ballot process, the retail electric provider shall change the customerís service plan to conform to the terms of service for an alternative electric service plan, but such plan shall not include a termination fee and at least 45 days notice shall be provided prior to the change. For retail electric providers not using the ballot process and retail electric providers imposed a charge under Section 39.110(d) for the calendar year 2007, the names and addresses of non-choosing residential customers shall be provided to the Public Utility Commission, who can then use this information to conduct a customer education program concerning alternative service plans and providers.† For this section, a residential customer is not considered to have affirmatively chosen an electric service plan offered by a retail electric provider if electric service is provided under a plan that is initiated through negative option marketing.

 

SECTION 6.† Amends Section 39.902(c), Utilities Code, by adding information on available prices and savings available from switching providers or plans to the information that the Public Utility Commission may provide in its education campaign.† Amends Section 39.902, Utilities Code, by adding subsection (d), which authorizes the Commission to require a transmission and distribution utility to issue public service announcements communicating that electric service reliability and outage restoration is not contingent upon receiving service from a particular retail electric provider.

 

SECTION 7.† Provides that the change in law to Section 17.157(a), Utilities Code, does not apply to a dispute for which a final administrative order is entered on or before the effective date of the bill.

 

SECTION 8.† Provides that the Act takes effect immediately if it receives a vote of two-thirds of all members elected to each house.† Otherwise, the bill takes effect September 1, 2007.

 

EFFECTIVE DATE

 

This Act takes effect immediately if it receives a vote of two-thirds of each house, otherwise it is effective September 1, 2007.

 

COMPARISON OF ORIGINAL TO SUBSTITUTE

 

SECTION 1 of the original amends Section 17.008, Utilities Code to delete certain provisions in the Section that applied only until the later of January 1, 2007 or the date on which the price to beat is no longer in effect.† Also deletes the provision that allowed a retail electric provider to deny an applicantís request to become a residential electric service customer on the basis of the applicantís electric bill payment history.

 

Adds a provision that a retail electric provider may not require a person applying for residential electric service to provide a security deposit or advance payment as a condition of service if: (1) it can be shown that the person was a customer of one or more retail electric providers or electric utilities in this state during the entire 12-month period preceding the request for electric service; and (2) during the preceding 12-month period, the person was not late in paying an electric service bill.† If a person does not satisfy such requirements, the retail electric provider may require a deposit or advance payment as a condition of service.†

 

SECTION 1 of the substitute amends Sections 17.157 (a) and (b), Utilities Code by delineating that the Public Utility Commissionís authority related to customer disputes applies only to residential customers and by adding language that allows the commission to investigate residential retail customer disputes in addition to resolving such disputes.

 

SECTION 2 of the original amends Section 39.051, Utilities Code, by adding Subsection (h) as follows:

 

(h)† Requires an electric utility affiliated with power generation companies that own 5,000 megawatts or more of generating capacity or with retail electric providers (retail providers) that have at least 10,000,000 annual sales of megawatt hours of electricity in the State of Texas to file with the Public Utility Commission (PUC) an unbundling plan for discontinuing, within a reasonable period of time determined by the PUC, the utilityís affiliation with power generation companies or retail providers.

 

SECTION 2 of the substitute adds new Section 39.051(h), Utilities Code, which requires that, on or before January 1, 2008, an electric utility and the competitive affiliates of the utility that were created pursuant to the unbundling requirements of Section 39.051 and that are owned by a common holding company shall each have a name and logo that is distinct from the name and logo of the other entities owned by the common holding company and distinct from the name and logo of the common holding company, its separate board of directors composed exclusively of individuals who are not members of the board of directors of any of the other entities owned by the common holding company and are not members of the board of the common holding company, a chief executive officer only of that entity, and have its headquarters located in a building separate and apart from the building or buildings in which the headquarters of any of the other entities owned by the common holding company is located or in which the headquarters of the common holding company is located.† In addition, the utility and the competitive affiliates shall each maintain an armís-length relationship with the other entities owned by the common holding company and shall enter into transactions with another entity owned by the common holding company only on a commercially reasonable basis and only as approved by a majority of the directors of its governing board of directors.† This section also requires the utility and the competitive affiliates to each prepare its separate annual financial statement in accordance with generally accepted accounting principles showing its assets and liabilities as separate and distinct from the assets of the other entities owned by the common holding company and to each ensure that the commission has complete access to all of the entityís books and records pertaining to transactions between the entity and another entity owned by the common holding company.

 

SECTION 3 of the original amends Section 39.101, Utilities Code, by amending Subsection (a) and (h) and adding Subsection (i) as follows:

 

(a)† Provides that the release of names and addresses of certain residential customers served by the affiliated retail electric provider at the end of the price to beat period is not to be considered to be a violation of customer privacy.

 

(h)† Requires an entity that provides retail electric service to offer a customer a deferred payment plan providing for a period of not less than five months for a customer to pay deferred amounts, rather than generally working with customers to establish a pay schedule for deferred bills, when paying bills that are due during an extreme weather emergency.† Redefines "extreme weather emergency."

 

(i)† Prohibits a retail provider from stating or implying that it can provide a greater level of reliability of electric service or preferential treatment in the restoration of service after an outage.† Permits the PUC to impose an administrative penalty for a violation of this subsection according to Section 15.024 (Administrative Penalty Assessment Procedure). Requires a violation of this subsection to be included in the highest class of violations in the classification system established by the PUC under Section 15.023 (Administrative Penalties).

 

SECTION 3 of the substitute adds new Section 39.101(i), Utilities Code, which prohibits a retail electric provider from stating or implying that it can provide better reliability of electric service or preferential treatment in service restoration than another provider.† Permits the provider to make claims about ďcustomer service reliability.Ē† Authorizes the Public Utility Commission to impose a penalty for a violation of Subsection (i), and requires that such a violation be included in the Commissionís highest class of violation.

 

SECTION 4 of the original amends Subchapter C, Chapter 39, Utilities Code by adding Section 39.1015 SUSPENSION OR DISCONNECTION FOR CERTAIN CUSTOMERS

Defines critical care residential customer, elderly low-income customer, low-income customer, and service provider.† Prohibits disconnection from July 1 through September 30 of each year to critical care residential customers or elderly low-income customers who contact the service provider regarding bill payment or in response to a disconnect notice, or non-elderly low-income customers who contact the provider and enter into a deferred payment plan for the current monthís charges and meet the terms of the current deferred payment plan.

The provider shall also request reconnect to a critical care or elderly low-income customer whose service is disconnected before or during the period if the customer contacts the provider or has previously been notified the customer is critical care. Provider shall request reconnect to non-elderly low-income customers whose service is disconnected before or during the period if the customer contacts the provider and enters into a deferred payment plan. The provider shall rescind a request for disconnection of a critical care customer, elderly low-income customer, or low-income customer made before the period begins if the provider is prohibited under this subsection from disconnecting or authorizing the disconnection of the customerís service during the period.

The provider cannot disconnect critical care customers during the period regardless of whether the customer has contacted the provider, if the provider has previously been notified the customer is critical care.

Critical care, low-income elderly, and low-income customers shall be allowed to establish deferred payment plans in person or by telephone, and the plan shall be confirmed in writing. Deferred payment plans may not contain a penalty for late payments accrued during July 1-September 30.

Customers must be allowed to renegotiate the deferred payment plan at least once regardless of whether economic circumstances have changed. For low income customers (not elderly), the deferred payment plan may require not more than 25 percent payment of the current monthís charges plus any due installments of a previous deferred payment plan.† For low-income customers other than an elderly low income customer, the provider is not required to extend a deferred payment plan entered under this Section beyond the March billing cycle following the moratorium period.

A deferred payment plan must provide for critical care and elderly low-income customers to not be required to pay any more than 25 percent of the deferred electric bills as part of the first electric bill issued after the end of the period and the remaining balance is to be paid in equal installments over the next 5 billing cycles, unless the customer requests fewer installments. Low-income (not elderly) customers are required to pay not more than 25 percent of deferred bills to initiate the agreement with the remaining balance paid over next 5 billing cycles, unless fewer installments are requested.

Provider can request disconnection after September 30 and only if terms of the deferred payment plan are not met, unless the disconnect is otherwise prohibited. Provider shall notice the customer that terms are not met before disconnecting the customer.

The provider may encourage a critical care customer or elderly-low income customer to make partial payment of a deferred bill during the moratorium, but the customer must be clearly informed she cannot be disconnected before Oct 1 for non-payment.

 

SECTION 4 of the substitute amends Subchapter C, Chapter 39, Utilities Code, by adding Section 39.110, which promotes residential customer choice by imposing a charge for the next three years on certain retail electric providers that do not meet a specified annual target for gaining residential customers outside their traditional service territory. The charge applies to retail electric providers with more than 250,000 residential customers that on December 31, 2006 were required to offer the price to beat to residential customers and to a successor in interest to such retail electric provider.† To avoid paying the charge, a retail electric provider with more than a million residential customers must gain 90,000 or more residential customers a year outside its traditional service territory, except that the provider may avoid the charge in the third year by meeting the target gain in customers for both of the first two years.† To avoid paying the charge, a retail electric provider with less than a million but more than 250,000 residential customers must gain 45,000 or more residential customers a year outside its traditional service territory, except that the provider may avoid the charge in the third year by meeting the target for both of the first two years.†† Residential customers gained by a provider that was an affiliate of the retail electric provider on December 31, 2006 count toward meeting the target.

 

If the target is not met, the annual charge is calculated by subtracting the number of residential customers the affiliated retail electric provider gains outside its traditional service territory from the target and multiplying by $100 on December 31, 2007, $200 on December 31, 2008, and $300 on December 31, 2009.

 

Unless funds are not appropriated from the system benefit fund sufficient to provide a 10 percent discount to low-income electric customers as provided by Section 39.903(h), the money collected from any charge assessed for not meeting the target customer gains are to be used to fund a Public Utility Commission customer education program for residential customers, including the provision of a call center.† If† funds are not appropriated from the system benefit fund sufficient to provide a 10 percent discount to low-income electric customers, the money collected for any charge shall be used first to assist low-income electric customers by providing a 10 percent reduced rate and then for a residential customer education program, including the provision of a call center.

 

SECTION 5 of the original amends Subchapter C, Chapter 39, Utilities Code by adding Section 39.1016, which prohibits a retail electric provider from charging a residential customer who requests cancellation or termination of retail electric service provided on a month-to-month basis a fee relating to the cancellation or termination.

 

SECTION 5 of the substitute amends Subchapter E, Chapter 39, Utilities Code by adding Section 39.2021which requires that until March 1, 2008, a retail electric provider who served price to beat customers on December 31, 2006, shall assist its residential customers who have not affirmatively chosen an electric service plan in choosing an alternative plan offered by the provider.† After March 1, 2008, the retail electric provider may provide a ballot to its residential customers that have not affirmatively chosen a service plan to allow the customer to choose another plan.† For a residential customer that does not choose a plan through the ballot process, the retail electric provider shall change the customerís service plan to conform to the terms of service for an alternative electric service plan, but such plan shall not include a termination fee and at least 45 days notice shall be provided prior to the change. For retail electric providers not using the ballot process and affiliated retail electric providers imposed a charge under Section 39.110(d) for the calendar year 2007, the names and addresses of non-choosing customers shall be provided to the Public Utility Commission, who can then use this information to conduct a customer education program concerning alternative service plans and providers.†

 

SECTION 6 of the original amends Subchapter C, Chapter 39, Utilities Code, by adding Section 39.110, as follows:

 

Sec. 39.110.† PROMOTION OF RESIDENTIAL CUSTOMER CHOICE.† (a)† Provides that the purpose of this section is to promote customer choice for residential customers by imposing a charge on certain retail providers to create an incentive for them to compete for residential customers.

 

(b)† Provides that this section applies to a retail provider that on December 31, 2006, had more than 250,000 residential customers and was required to offer service to residential customers at the price to beat, and to any successor of the retail provider, and any reference in this section to a retail service provider includes a successor to such provider.† Provides that this section no longer applies to a retail provider if the provider is not assessed a charge under Subsection (c) for two consecutive years.

 

(c)† Requires PUC to impose an annual charge on a retail provider that is subject to this section under certain conditions.

 

(d)† Sets forth the manner of determining the amount of the annual charge under this section.

 

(e)† Requires that the funds collected from a charge assessed under this section shall be held in a segregated account by the retail electric provider and allocated for programs devised and directed by the PUC for a customer education program in the transmission and distribution utility service territory in which the retail electric provider was required to offer the price to beat and a low-income discount program; and a fund to be paid to residential customers served by the retail provider in the transmission and distribution utility service territory in which the retail provider was required to offer the price to beat.

 

(f)† Authorizes the PUC to adopt and enforce rules necessary for the implementation of this section.

 

SECTION 6 of the substitute amends Section 39.902(c), Utilities Code, by adding information on prices and savings available as a result of switching providers or plans to the information that the Public Utility Commission may provide in its education campaign.† Amends Section 39.902, Utilities Code, by adding subsection (d), which authorizes the Commission to require a transmission and distribution utility to issue public service announcements communicating that electric service reliability and outage restoration is not contingent upon receiving service from a particular retail electric provider.

 

SECTION 7 of the original amends Section 39.202, Utilities Code, by adding Subsections (q) and (r) to require affiliated providers to release names and addresses of residential customers who have not affirmatively chosen a provider or plan and the PUC shall release those names and addresses to retail electric providers licensed by the PUC and currently providing service.† The PUC shall update the list to reflect customers who have chosen a provider or plan. Also authorizes PUC to conduct a program requiring residential customers receiving service from an affiliated provider under a month-to-month service plan to choose a retail provider or plan.

 

SECTION 7 of the substitute provides that the change in law made to Section 17.157(a), Utilities Code, by this Act does not apply to a dispute for which a final administrative order is entered on or before the effective date of this Act.

 

SECTION 8 of the original amends Subchapter E, Chapter 39, Utilities Code, by adding Section 39.2025, as follows:

 

Sec. 39.2025.† MARKET REVIEW BASED ON PRICE OF ELECTRICITY. (a)† The PUC may review, as described in Subsection (b), the price of the electric service plan under which customers who took service under a price to beat tariff on December 31, 2006, who have not subsequently chosen an alternate retail electric service plan are served in a transmission and distribution service territory if at the end of 2007 the number of such customers exceeds 25 percent of the number of residential customers in the transmission and distribution utility service territory in which such customers take service; or at the end of calendar year 2008 the number of such customers exceeds 15 percent.

 

(b)† If the price charged by a retail electric provider to applicable residential customers is more than two cents per kilowatt hour higher for more than six consecutive months than the simple average of the prices charged for other similar electric service plans in the relevant service territory, the PUC may initiate a review of the retail electric providerís price charged to such customers.† If the PUC determines that the price charged is not reasonable based on its review, the PUC may reduce the retail electric providers residential price charged, but not to less than one cent per kilowatt hour higher than the simple average of the prices charged for other similar electric service plans in the relevant territory at the time the downward adjustment is required.

 

(c)† The PUC may adopt and enforce rules as necessary or appropriate to carry out this section.

 

(d)† This section expires on September 1, 2009.

 

SECTION 8 of the substitute is the effective date of upon passage, or, if the Act does not receive the necessary vote, September 1, 2007.

 

SECTION 9 of the original amends Section 39.902, Utilities Code, by amending Subsection (c) and by adding Subsections (d) and (e).† Authorizes PUC to provide customers information concerning marketplace prices available in the marketplace, savings available to customers by switching retail electric providers, plans and information concerning certain specific retail providers.† Authorizes PUC to require an affiliated provider to provide information to customers regarding savings available to the customer from switching to another retail provider or product in a manner specified by PUC including bill inserts or statements on customer bills. Authorizes PUC to require a transmission and distribution utility to issue public service announcements that inform customers of certain information regarding service following an outage is not contingent upon the customer's receiving service from a particular retail provider.

 

SECTION 10 of the original is the effective date of upon passage, or, if the Act does not receive the necessary vote, September 1, 2007 except as otherwise provided by this Act.