ORIGINAL REPORTING: Fixed charge battle looms in Texas as regulators tackle rate design reform
Fixed charge battle looms in Texas as regulators tackle rate design reform; A legislative effort to chart new ratemaking mechanisms in the Lone Star State has the utility sector drawing familiar battle lines
Herman K. Trabish, August 23, 2016 (Utility Dive)
Editor’s note: Regulators continue to consider the proposals outlined in this story. The health of the Texas distributed resources industry is at stake.
On orders from their lawmakers, Texas utility regulators are looking at new rate design mechanisms that could lead to new possibilities on the grid – or yet another debate about fixed charges. A review of 11 different rate design options for the Public Utility Commission of Texas (PUCT) was the basis for the larger review of utility ratemaking aimed at modifying regulatory methods to meet 21st century needs. New rate design options are currently under consideration across the U.S. to align utility business practices with the deployment and operation of third-party resources like rooftop solar and battery storage. Some say these early rate reform discussions in Texas may be headed down an all too familiar path toward contention on fixed charges, with little upside for non-utility stakeholders.
In response to Texas Senate Bill 774, passed in May 2015, the rate design study described mechanisms that could significantly change traditional cost-of-service ratemaking in Texas. A revenue decoupling mechanism, one of the study’s central recommendations, would adjust energy prices to compensate utilities by “decoupling” revenues from electricity sales. Lost revenue adjustment mechanisms (LRAMs) make possible recovery of revenues that might be lost to efficiency and DER between rate cases so the utility can be made whole without the complications of a regulatory proceeding. A more forward-looking proposed mechanism is ratemaking based on performance. With it, the utility is rewarded for meeting any kind of performance targets established through the regulatory process, including for efficiency and DER growth… click here for more