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POLRized in Texas: A Duty Unresolved

The Texas method for assigning provider of last resort draws criticism from market players and consumer advocates.
Fortnightly Magazine - July 15 2002

Why should it be any different with competitive electricity?"

The REPs not affiliated with a Texas utility proposed the same construct. "ARM [Alliance for Retail Markets] proposed that the Commission allow AREPs to bypass the POLR step in this limited situation [customers dropped to POLR for non-payment]. ...This is essentially a return to the old, pre-January 1, regulated-world methodology." 4 What is not to like for the unaffiliated REPs (e.g., ARM members)? In this scenario they get rid of the POLR hot potato, and foist unattractive customers onto a competitor. Also, they do not get entangled in the issues of disconnect by a competitive supplier, an issue that has befuddled the Georgia natural gas market.

Not surprisingly, competitors affiliated with a Texas TDU (i.e., the AREP in their own service territory) have different ideas.

Reliant Resource Incorporated (RRI), for example, in its filing with the PUCT suggested the opposite extreme for non-paying customers. "Prior to implementation of retail electric competition, electric customers who failed to pay their bills received a disconnect notice. Generally, such customers paid the unpaid balance prior to being disconnected. However, if a customer did not pay, at that point the provider could disconnect service. RRI believes that this structure was based on sound public policy that competition has not changed. Therefore, RRI proposes that in developing a better framework for POLR service, the customer protection rules [should] be modified to reinstate the right of disconnect to the REP. Thus, customers would no longer be dropped to POLR for non-payment of electric bills." RRI notes that the only class of customers to whom POLR must be provided are those whose REPs go out of business, and customers who request such service. RRI further points out that dropping customers to POLR "may delay the disconnection, but it also increases the Customer's debt and makes it harder to restore service." According to Eaton, some residential customers support this portion of the RRI proposal. They would prefer that there be no extra POLR step because they have the same concern of mounting bad debt and fees.

The initial comments of TXU Energy, the other 800-pound Texas gorilla, differed quite substantially from that of RRI. "Only the POLR should be able to disconnect residential and small commercial retail customers. ...If REPs engage in widespread disconnections, even if they were authorized under a Commission-adopted rule, time-consuming and controversial regulatory oversight might result. Similarly, if REPs abuse the disconnection process, at least in the eyes of the marketplace, allegations of market failure and customer abuse would surely be made, again undermining public confidence in the Texas market." 5

TXU went on to propose two pricing options for POLR. The first option would be based on July prices, with REPs bidding that rate plus an adder. The second option would give POLR customers the option of choosing between a month-to-month service (the current rule) and a minimum stay requirement that would allow for a fixed-rate POLR offering, but with the fuel adjustment that is done with the PTB rate. The Office of Public Counsel did not