Granting customers in the Stanton, Colorado City, Brady, and Celeste areas the right to choose their electricity provider took a step forward last week as most parties to a case before the Public Utility Commission of Texas concerning the transition to retail choice at Sharyland Utilities' former Cap Rock service areas agreed to a settlement governing the transition.

The settlement still requires approval from the Public Utility Commission, but is only opposed by a single party. Parties signing the settlement include Staff of the Public Utility Commission, Sharyland Utilities, the City of Brady, several retail electric providers, and other parties.

As previously noted, some 44,000 customers in what used to be the service territory of Cap Rock Energy (now part of Sharyland Utilities) cannot currently choose their electric provider, a right extended to most other customers in the state, including customers in Dallas, Houston, and Corpus Christi.

Due to the lack of competition, customers in the former Cap Rock service areas are paying higher electric rates than those available in parts of Texas open to choice. For example, residential customers at the ex-Cap Rock territories pay about 11¢/kWh for electricity, but rates at Oncor, a comparable service area, are as low as 7¢/kWh.

The settlement filed with the Public Utility Commission would introduce choice to customers at Sharyland's Stanton, Colorado City, Brady, and Celeste divisions starting May 1, 2014, or 90 days after Sharyland files tariffs to implement approved unbundled distribution rates for the territories, whichever is later.

Once retail choice starts, Sharyland will no longer sell electricity supply to customers, and will only deliver this power supply to customers over its poles and wires.

Instead, customers will be able to choose among competing retail electric providers for their power supply.

Under the settlement, customers will be given an advanced opportunity to shop for a low electric rate from a retail electric provider prior to Sharyland's official switch on May 1, 2014, with no interruption in service.

But what happens if customers do not shop for their own retail electric provider?

Any customers who do not switch ahead of May 1, 2014 will be switched to one of several "default" retail electric providers (default REPs). These default retail electric providers act as a backstop, and are similar to the old affiliated retail electric providers originally used in Texas when choice was introduced to most parts of the state in 2002.

However, there are significant differences in how the default REP mechanism will work compared to the old affiliated retail electric providers. First, there was only a single affiliated retail electric provider serving non-shopping customers in each service area. In contrast, the settlement provides that at the ex-Cap Rock areas, multiple default REPs may be selected, with non-shopping customers randomly assigned to these different default REPs.

More importantly, the electric rate charged by the default REPs at Sharyland's Stanton, Colorado City, Brady, and Celeste divisions will not be regulated by the Public Utility Commission. The settlement only requires that the rate charged by the default REP shall be a market-based, "month-to-month" product, which means the electric rate could change every month, at the default REP's discretion.

In contrast, the old affiliated retail electric providers charged a "Price to Beat" which was regulated by the Public Utility Commission according to an established formula, and which did not change often.

Customers at Sharyland who do not choose their own REP may be subject to large swings in their electric rate if they are placed with the default REP. Accordingly, it will be crucial for customers to shop for a low electric rate prior to the assignment of customers to the default REP.

The good news is that customers at Sharyland can leave the default REP at any time, without paying a termination fee or other penalty.

The expansion of choice to the Sharyland Stanton, Colorado City, Brady, and Celeste divisions will benefit Texans, allowing them to save money on their power bills (possibly 30% based on current rate differentials) and allowing them to enjoy the rewards, promotions, innovations, and other value-added services currently available to customers who can shop for power.

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