Consumer groups warn that proposed rate-making schemes could lead to quick rate hikes.

AUSTIN — Not necessary and maybe even a bad idea. Those are two of the bottom-line conclusions of state regulatory staff regarding proposals that would make it easier for electric monopolies to increase rates.

“No significant evidence suggests that the current ratemaking system is in major need of repair,” Public Utility Commission staff wrote in an Oct. 21 agency filing.

At issue are “alternative rate-making” proposals that would replace the current system for adjusting electricity rates with a different system in which monopoly utilities could obtain rate hikes more quickly. Transmission and distribution utilities have lobbied hard for such changes, and the Texas Legislature in 2015 directed the PUC to examine alternative rate-making proposals and report back.

But the PUC staff found that “the use of inappropriate alternative ratemaking mechanisms could result in uncertain and unintended consequences for the Texas competitive retail market and significantly impact the pricing strategies of retail electric providers.

“The Commission believes that no compelling need currently exists for specific legislative authorization of a particular type or types of alternative ratemaking mechanisms,” staff wrote.

Those findings are in line, at least in part, with the opinions of various consumer groups and others who found that the proposed schemes would lead to higher prices for ratepayers, more paperwork for regulators and big headaches for retail electric providers.

special white paper report commissioned by the PUC and released publicly in May enumerates many of the alternative rate-making proposals. Besides “formula rate plans” (in which rates are adjusted automatically to keep utility revenues within a specified band), other alternative rate-making schemes include “straight fixed-variable rate” plans (in which utilities recoup their fixed costs through per-customer charges that are independent of the volume of electricity consumed) and “lost-revenue adjustment mechanisms” (in which rates can be adjusted periodically to compensate the utility for lost revenues resulting from consumer conservation).

But in its Oct. 21 filing, PUC Staff wrote that the changes aren’t necessary because the current system works well.

“While some parties argue that major rate cases are time-consuming and expensive, the Commission concludes that the existing paradigm in which periodic rate proceedings are used in combination with existing streamlined recovery mechanisms is, in general, an efficient and effective way to ensure that electric rates are just and reasonable,” wrote staff.

“Additionally, the Commission notes that if the legislative were to authorize one or more specific alternative ratemaking mechanisms, the particular aspects of those mechanisms might not be appropriate for every utility under all circumstances. Within ERCOT, company differences exist because of size, geography, and customer and load make-up.”

You can read more about alternative ratemaking, and consumer and PUC staff response to various proposals, at the PUC website, in Project 46046, found here.

— R.A. Dyer