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<title>November 2001: Texas Public Utilities Commission Approves Settlement
Agreement To Delay Retail Competition</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<img src="../images/statelin.gif" alt="STATELINE by Robert Olson" border="0" width="375" height="75">
</center><p align="left"><b><u><br>
November 2001</u>
<br>
<span style="font-family: Palatino; color: black"><font size="6">Texas Public
Utilities Commission Approves Settlement Agreement
To Delay Retail Competition<br>
</font></span>
</b><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
200</em>2/01/19)</font></p><center>
</p>
<p class="MsoNormal" align="left"><span style="font-family: Palatino">The Public
Utilities Commission of Texas (“PUCT”) approved a settlement agreement
October 31, 2001, which will delay the start of retail competition in Texas’
Southeastern region. The Settlement Agreement (the “Agreement”) was among
Entergy Gulf States, Inc. (“EGSI”), the Staff of the Commission, Texas
Industrial Energy Consumers, CLECO Marketing & Trading LLC, and certain
other parties who may chose to sign the agreement. Under the terms of the
Agreement, the start date for retail open access in EGSI’s Texas territory
is delayed from January 1, 2002 until September 15, 2002.</span></p>
<center>
<p class="MsoNormal" align="left"><span style="font-family: Palatino">The Texas Public
Utility Regulatory Act directs the PUCT to delay the onset of retail open
access if the PUCT determines that the power region is unable to offer fair
competition and reliable service to its customers on January 1, 2002.</span></p>
<center>
<p class="MsoNormal" align="left"><span style="font-family: Palatino">The PUCT Staff
petitioned the PUCT to open a docket and consider a delay of retail open
access because, as opposed to other service regions in the state, there had
been no customer participation in the retail competition pilot project in
the Southeastern region. Further, Staff asserted that fair competition and
reliable service are hindered because the Federal Energy Regulatory
Commission (“FERC”) has not yet approved a regional transmission
organization (“RTO”) for the Southeastern region.</span></p>
<center>
<p class="MsoNormal" align="left"><span style="font-family: Palatino">The Staff’s
petition also requested a delay in the required capacity auction, which, by
statute, was to take place at least 60 days prior to the competition date.
In the absence of established competitive forces, the Staff contends that
bid prices for capacity would probably be quite low and affects EGSI’s
“price-to-beat”. (“Price-to-beat” is the rate available to residential and
small commercial customers of a retail electric provider’s affiliated
transmission and distribution utility calculated as 6% less than an
affiliated electric utility’s corresponding average bundled residential and
small commercial rate effective on January 1, 1999, adjusted by a fuel
factor.) Further, Staff questioned EGSI’s ability to serve its native load
if part of its capacity were auctioned-off.</span></p>
<center>
<p class="MsoNormal" align="left"><span style="font-family: Palatino">Under the terms of
the Agreement, capacity auctions will be delayed until at least 60 days
before retail open access begins. EGSI’s current pilot project will continue
as is until September 15, 2002. Current rates, as well as previously
determined discount rates, are frozen until retail open access is achieved.
The signatories agree not to file for a change of rates during the freeze
period.</span></p>
<center>
<p class="MsoNormal" align="left"><span style="font-family: Palatino">The parties also
agree that the current price-to-beat fuel factor and base rate tariff cases
should continue before the PUCT as planned.</span></p>
<center>
<p class="MsoNormal" align="left"><span style="font-family: Palatino">The Agreement
states that energy efficiency and renewable energy programs should move
forward according to applicable statutes. EGSI will include the expenses
incurred in implementing the energy efficiency and renewable energy programs
into its annual report.</span></p>
<center>
<p class="MsoNormal" align="left"><span style="font-family: Palatino">The Agreement
establishes procedures for incorporating a FERC-approved, functional RTO in
the process of achieving retail open access. The procedures include: “(1) a
market protocols project for the purpose of developing in a noncontested
project the protocols to support retail open access in EGSI’s Texas service
industry; (2) a contest proceeding to consider the application for
certification by the PUCT of Entergy’s Qualified Power Region (QPR); and (3)
a contested docket to determine whether the market systems and institutions
in EGSI’s Texas service territory are ready for retail open access.” Under
the Agreement, a market protocols project will commence at the PUCT upon the
PUCT’s approval of the Agreement. The market protocols project will be a
non-contested case and will provide interested parties an opportunity to
participate in workshops and submit written comments evaluating the Open
Access Transmission Tariff and protocols.</span></p>
<center>
<p class="MsoNormal" align="left"><span style="font-family: Palatino">Market participants
will have a period of 4 months to negotiate competitive contracts. Retail
open access will begin under price caps during this period. This 4-month
period will begin at the later of either the PUCT’s final order certifying
the QPR or a PUCT order determining that the EGSI service area is ready for
retail open access.</span></p>
<center>
<p class="MsoNormal" align="left"><span style="font-family: Palatino">The Agreement
requires EGSI to continue to seek approvals for business separation, but
separation will not occur until the day before retail open access. As part
of Texas’s electric deregulation legislation, utilities are required to
unbundled their business activities by separating into three different types
of companies: power generation, retail electric provider, and a transmission
and distribution utility. Before and after this business separation, EGSI’s
obligation to purchase qualifying facilities energy will be governed by
applicable law.</span></p>
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<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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