News Stories

• Re:  Commission Staff’s Petition For A Declaratory Order Interpreting 16 TAC § 25.475(b)(5)
• Excerpts from TPUC Petition:
  {***}
  Commission Staff respectfully requests that the Commission enter an order declaring that, under PURA § 39.112(a) and 16 TAC § 25.475(b)(5), the retail electric providers described below may not increase the price charged under a fixed rate contract entered on or after August 1, 2022 to reflect fluctuations in the amount of Securitization Charges incurred by a REP over the life of a customer’ s fixed rate contract.
• III. BACKGROUND In February 2021, the ERCOT power region suffered an unprecedented electric generation shortage during a time of historic energy demand, triggering a series of extraordinary market events that ultimately left ERCOT and its market participants with billions of dollars of debt. In response, the Texas Legislature established a mechanism under which ERCOT could finance approximately $3 billion of debt with obligation bonds obtained through a process commonly referred to as “securitization.”7 Subsequently, in October 2021, the Commission issued two Debt Obligation Orders8 authorizing ERCOT to securitize the debt and repay the obligation bonds with funds derived from Securitization Default Charges’ and Securitization Uplift Charges (collectively, Securitization Charges) assessed against certain market participants over the course of approximately 30 years. 
• Securitization Default Charges – ERCOT assesses Securitization Default Charges on a monthly basis to each qualified scheduling entity (QSE) and congestion revenue rights account holder (CRRAH) representing one or more wholesale market participants in the ERCOT power region.12 As established by the Debt Obligation Order issued in Docket No. 52321, ERCOT calculates the Securitization Default Charges by allocating its monthly billing requirement-the amount ERCOT must pay each month to ensure full and timely repayment of the corresponding serviced debt-among market participants on a pro-ram basis according to the volume of market activity conducted in the most recent month for which final settlement data is available.13 ERCOT began issuing invoices for Securitization Default Charges on January 11, 2022.14 
• As the servicer for the debt obligation bonds, ERCOT must file periodic “true-ups” to review and adjust the monthly billing requirement in order to correct any under- or over-collections and ensure the expected recovery of amounts sufficient to timely provide all payments of debt service. 15 True-ups do not affect the formulas or methodology used to calculate the allocation of Securitization Default Charges across obligated market participants. Since the first invoices for Securitization Default Charges were issued, ERCOT has filed five true-up reports. 
• Securitization Uplift Charges – ERCOT assesses Securitization Uplift Charges on a daily basis to each QSE representing one or more load serving entities (LSEs) in the ERCOT market.17 As established by the Debt Obligation Order issued in Docket No. 52322, ERCOT calculates Securitization Uplift Charges by allocating its daily billing requirement-the amount necessary to ensure the full and timely repayment of the corresponding serviced debt-among QSEs based on the actual daily load-ratio share of each LSE represented by each QSE. 18 Following a July 12, 2022, market notice, ERCOT began issuing invoices for Securitization Uplift Charges on August 1, 2022.19 
• As the servicer for the debt obligation bonds, ERCOT must file periodic true-ups to review and adjust the daily billing requirement in order to correct any under- or over-collections and ensure the expected recovery of amounts sufficient to provide all payments of debt service.20 Trueups do not affect the formulas or methodology used to calculate the allocation of Securitization Uplift Charges across QSEs. Since the implementation of Securitization Default Charges, ERCOT has filed six true-up reports.21
• Invoicing Mechanism – Any entity that sells electric energy to retail customers in the competitive choice areas inside the ERCOT power region must register both with the Commission as a REP and with ERCOT as an LSE.22 As detailed above, ERCOT does not directly assess Securitization Charges against individual REPs in their capacities as LSEs. Instead, ERCOT invoices the Securitization Charges directly to QSEs and CRRAHs that represent LSEs in the ERCOT marketplace, which are then responsible for billing, collecting, and remitting payment from the obligated LSEs they represent.23 Because ERCOT does not invoice Securitization Charges directly to LSEs, Commission Staff does not have ready access to the information necessary to determine the amount of Securitization Charges an individual LSE is responsible for in a given billing period, or how the amount of Securitization Charges paid by an individual LSE fluctuates over time.
• Customer Bills – In the competitive market, market forces should encourage a REP to offer its fixed rate products at competitive prices that afford the REP an opportunity to recover its cost of doing business. REPs are not guaranteed to make a specific profit from their fixed rate products, nor are they guaranteed to recoup all of their costs in any given billing period or over the life of any specific contract. A REP must determine its own risk tolerance associated with fluctuating recurring costs, such as ancillary service charges, energy prices, and Securitization Charges, knowing that another REP may offer a similar product at a lower price point because it is differently positioned against those same risks. On June 21, 2022, Commission Staff issued guidance providing that, if a REP chooses to identify the portion of a product’ s price attributable to the recovery of Securitization Charges as a separate line-item charge on customer facing documents, the associated price component should be labeled as a “Market Securitization (Debt) Financing” charge.24 
• Commission Staff is aware that, since Securitization Uplift Charges were implemented on August 1 , 2022 , several REPs have begun offering fixed rate products subj ect to EFLs that both affirmatively identify a Market Securitization (Debt) Financing charge as a component of the “fixed” price and state that the rate applied to the Market Securitization (Debt) Financing charge “may” change over the life of the contract. Commission Staff has reason to believe that at least some of these REPs do, in fact, vary the rate applied to Market Securitization (Debt) Financing charges throughout their customers’ contract terms in order to accommodate fluctuations in the amount of Securitization Charges incurred over time. As a recurring charge included in the price of a product, 25 any adjustment of the Market Securitization (Debt) Financing charge during a customer’ s contract term will inherently cause the price of the fixed rate product to change.  {***}

Petition For Declaratory Order  (01/31/2024)
56168  (01/31/2024)