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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

like either proposal, and was particularly dismissive of the first option that uses a peak month price of July to set the base price for the balance of the year.

In late May 2002, the PUCT published proposed POLR rules. They include some of the following:

  • Assignment of non-paying customers to the AREP at the PTB;
  • The non-AREP POLR would get requesting customers and customers whose REP who had gone out of business;
  • Both the AREP-POLR and the non-AREP POLR would be able to offer other goods and services to their assigned customers;
  • The initial non-AREP POLR service would be bid out as a percentage over the PTB. No bid would be accepted if it were more than 125 percent of the PTB. If there were no bidders, a non-AREP POLR would be assigned by lottery;
  • The non-AREP POLR price would change on a month-to-month basis in accordance with greater than five percent changes in natural gas prices at the Henry Hub; and
  • Until January 1, 2005, both the POLRs would have the right to ask to the TDU to disconnect after appropriate notification. After that time period, the rule would allow all REPs the right to disconnect. The PUCT also plans to revisit this issue before January 25, 2005.

These proposed rules were published in the Texas Register on June 7, 2002, with final rulemaking scheduled for August. Perhaps, just perhaps, the process has moved to a consensus. Comments on the newest proposed rules by Steve Bezecny of Reliant certainly make one optimistic:

"RRI generally supports the PUC Staff's proposed rule as a significant improvement. Reliant will suggest certain modifications, however we believe the proposed rule moves in the right direction for customers, REPs and POLRs. Staff's proposed rule has two key features:
"1) The move of non-pay customers from POLR service to the AREP at the PTB. With this move the AREP will have disconnect rights-a right not currently given to the AREP under the current rules. Customers benefit by receiving the PTB price instead of the higher POLR price. In addition, the rule will allow all REPs to disconnect for non-payment beginning in 2005, lowering uncollectible expense, which would ultimately be paid by other customers.
 
"2) With the move of non-pay customers to the PTB, POLR service will be for customers whose REP unexpectedly leaves the market or customers who choose POLR. Since the POLR provider will not be able to predict what loads it will be serving from day to day, the POLR has limited ability to hedge. The proposed POLR pricing in the draft rule contains pricing mechanisms based on certain indicators of current market prices. Reliant is still studying the proposed mechanisms; however, we firmly support the concept in the proposed rule of following current market prices."
  1. Project No. 24462-Draft May 2002 Report Card on Retail Competition (Preliminary-For discussion only.) Brian Lloyd, May 21, 2002. PUCT.
  2. Dallas Morning News, Oct. 17, 2001.
  3. For example, see Reliant Resources's Proposal to Revise POLR Structure, March 12, 2002, Project No. 25360.
  4. Alliance for Retail Markets (ARM) response to