The Public Utility Commission of Texas (PUC) is moving forward with reforms meant to prevent electric customers from paying the highest rate for power if their energy provider goes out of business and customers are forced onto emergency service.

Last week, the PUC approved a draft to revamp what is currently known as "Provider of Last Resort" service, or POLR service.  POLR service is where customers end up if their chosen electric company goes bankrupt or leaves the market.

Under the current rules, the POLR rate is set at a variable price tied to the wholesale energy market, plus a 20% mark-up to cover the risk electric companies serving as Providers of Last Resort take on.  However, that means the POLR rate is the highest in the market, and extremely volatile.

Some 40,000 Texans were hit with extremely high POLR prices never seen before in the Texas market this summer, because five electric companies went out of business and left customers stranded.  The rates were higher than normal because of extreme volatility in the wholesale market, with record high prices.

The PUC is trying to prevent customers from seeing those prices again.

Under the proposal issued last week, the PUC would try to put more stranded customers with an electric company that charges a lower rate.  The PUC would encourage more "volunteer" Providers of Last Resort, who would charge a month-to-month market rate without the current mark-up.  Mandatory Providers of Last Resort -- electric companies pressed to take on stranded customers -- would also only be allowed to charge a monthly market rate without the current mark-up.  The only time the mark-up would be permitted would be for extremely large transitions, where the Providers of Last Resort would be forced to buy large blocks of extra power for hundreds of thousands of new customers on very short notice -- an expensive proposition.

Another alternative suggested by the PUC is giving customers transitioned to a Provider of Last Resort a short period -- say 30 or 45 days -- to find a new electric company before having to pay the marked-up POLR price.  During this period, customers would not have to post a deposit with their Provider of Last Resort either.  During the troubles this summer, customers in some cases were faced with having paid three deposits:

  1. First to their original energy provider who went out of business, with the deposit not refunded or refunded very slowly;
  2. Second to their interim Provider of Last Resort to prevent disconnection of service;
  3. And third to a new energy provider if customers wanted to switch away from the POLR to another company with a cheaper electric rate.

The proposed rule would attempt to address that situation.  The PUC also suggested it may decide to waive special fees so that customers can switch electric companies immediately to leave POLR service and find a cheaper electric company, instead of waiting for their monthly meter reading.  Typically such accelerated, or out-of-cycle, switches cost the customers money.

While the PUC is aiming to reform the emergency service rules, the Commissioners recognize that the best solution is for electric companies to not go out of business, so customers never have to deal with having to be transitioned to a Provider of Last Resort.