Periodic Rate Adjustment Extended Until 2017

Published: Mon 04 Jan 2016
A blog entry by Brian J

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Brian J

Brian J's Blog

In 2011, the Texas legislature passed a law that would allow electric utilities to push through with periodic rate adjustments to correspond with their spending on the poles and wires that distribute electricity to individual homes. This might impact the electricity rates for the cusumers in Texas and cutting down the cost might be bit difficult.  [0]

The law allows "the PUCT to approve an electric utility tariff or rate schedule in which a non-fuel rate may be periodically adjusted upward or downward, based on changes in the parts of the utility's invested capital that are categorized as distribution plant, distribution-related intangible plant, and distribution-related communication equipment and networks. Such rate requests would be required to be adjudicated in 60 days or less."[1]

The law came about because "electric utilities asked for an exception to established “rate case” procedures, which normally occur every five years and take approximately 18 months to be litigated at the Public Utility Commission of Texas. This exception was granted in the form of the PRA, which allowed electric utilities to recover certain distribution costs between rate cases."[2]

Now, SB 774 "extends authorization for the PRA from January 2017 until September 2019. The bill also requires the PUCT to conduct a study by January 2017 that analyzes ratemaking mechanisms adopted by other states and make legislative recommendations for improving the ratemaking process."[3]

"If utility companies like Dallas-based Oncor or Houston-based Centerpoint want to raise rates to pay for building electric lines, they go ahead and build them — and later ask the Public Utility Commission for permission to get their money back from consumers through a rate increase. The bill would allow the utilities to go ahead, build and raise rates — without going through a long and contentious process at the Public Utility Commission before the rate increase."[4]

The Texas Supreme Court, in an opinion issued on January 14, 2014, however, "suggests that the Public Utility Commission may not be limited to the Distribution Cost Recovery Factor, and could indeed adopt a formula rate like the Cost of Service Adjustment that further streamlines the ratemaking process by annually updating a utility’s cost of service for both capital investment and operating expenses."[5]