Recently, the Public Utility Commission of Texas revoked the electric supplier license of Proton Energy, a small retail electric provider (REP), which prompted a transition of customers to the Provider of Last Resort (POLR), a backstop service that carries a much higher rate than current electricity prices in the market.

It's a reminder that customers need to do their homework when shopping in the electricity marketplace, and that just finding the lowest electric rate isn't the stopping point in the shopping process.  Signing up for the absolute lowest rate doesn't do any good when the company supplying it goes out of business, and customers are transitioned to higher-priced POLR service.

The Texas Public Utility Commission revoked Proton Energy's license as part of a settlement concerning alleged violations by Proton in the retail market, with the alleged violations concerning, among other things, the use of "switch holds" and the disconnection process.  Proton was provided with an opportunity to maintain its license if it sold itself to a new owner, but a sale did not materialize.

With Proton Energy not undergoing a change in control, the Public Utility Commission acted by revoking Proton Energy's authority to serve retail electric customers in Texas.

This left about 600 customers without a retail electric provider.  To ensure that these customers had continuous electricity supply, and did not have any interruption in service, the customers were assigned to Providers of Last Resort, who step in and serve the customer.

Because POLRs must start serving customers at a moment's notice, they can't hedge their power supplies in advance or use bidding strategies to procure lower-priced wholesale power. As a result, the POLR electric rate is much higher than standard retail rates in the market.  In some cases, the POLR rate is typically 50% higher than normal electric rates (with POLR prices of 13¢ or 14¢ when market rates are at 8¢).

Due to these higher rates, the Texas Public Utility Commission (PUC) encourages POLR customers to shop and sign up for a lower rate.

"POLR service is designed as a temporary safety net assuring customers of continuous electric service if a REP leaves the market and customer accounts are not sold or transferred to a competitor. POLR service is relatively high-priced due to planning costs and uncertainty at a given time in the number of customers and electricity load," the PUC said.

"It is important that POLR customers understand the need to find a lower-cost offer as soon as possible. POLR rates can be significantly higher than current competitive electricity rates," the Commission said in a news release.