By Patrick Dinnin

The Public Utility Commission of Texas (PUC) has recently begun reviewing electric utilities’ base rates, and it is expecting a busy 2019. In April 2018, the PUC adopted a new rule in 16 Texas Administrative Code § 25.247 (the Rule), requiring nine electric utilities to file rate case proceedings pursuant to the schedule listed in the rule. The filing schedule lists deadlines ranging from August 2018 to October 2021, and AEP Texas, Inc. (AEP Texas) and CenterPoint Energy Houston Electric, LLC (CenterPoint) are both due to file this year. The PUC has also ordered Southwestern Public Service Company (SPS) to file a rate case during 2019, which is not included in the new Rule’s schedule. As these agencies and interested parties participate in the ongoing rate cases and prepare for these upcoming filings, it is helpful for cities to have an understanding of what these cases may mean for municipalities who are regulatory authorities with rate setting power as well as ratepayer citizens.

Recent Rate Cases

Texas-New Mexico Power Company (TNMP) was the first utility required to file its rate case under the new PUC Rule. Accordingly, on May 30, 2018, TNMP filed its application for authority to change rates in Commission Docket No. 48401 (ahead of its August 31 deadline). Cities Served by TNMP participated throughout the rate making proceedings. The PUC issued a final order on December 20, 2018, approving an increase in TNMP’s rates by $31.3 million.

Next, Wind Energy Transmission Texas, LLC (WETT) is required by the PUC’s Rule to file a rate case by October 1, 2019. However, due to its reported $16.4 million over-earning in 2017, WETT was ordered by the PUC on October 16, 2018 to file a base rate proceeding by February 13, 2019, sooner than the rule requires. The PUC later rescinded that order when the company came to an agreement with PUC Staff to decrease its transmission cost of service and wholesale transmission service rate by $16 million in Docket No. 48874. The decreased rate took effect on January 1, 2019. This was the second time in six months that WETT agreed to voluntarily reduce its rates.

Rate Cases Expected to be Filed in 2019

As noted above, the PUC is anticipating rate case filings from AEP Texas, CenterPoint, and SPS in 2019.

AEP Texas serves more than one million customers throughout the deregulated Texas marketplace, with transmission facilities covering nearly 100,000 square miles in south and west Texas. Pursuant to the schedule in the PUC’s Rule, AEP Texas is required to file its rate case by May 1, 2019. This will be AEP Texas’ first rate case filing since 2006.

CenterPoint serves more than 2.5 million customers in the greater Houston area. While CenterPoint is required by the PUC’s Rule to file before July 1, 2019, we expect that it will file its rate case early, around the beginning of April 2019. This will be CenterPoint’s first rate case filing since 2010.

Additionally, pursuant to the PUC’s Order in Docket No. 47527, SPS must file its next base-rate case no later than December 31, 2019. We expect that SPS will file sooner than the December deadline, likely in the spring or summer of 2019. This will be SPS’s first rate case filing since 2016.

What Cities can Expect

With each of these rate proceedings, municipalities can expect higher rates for electric service. When utilities file base rate cases, they most often file to raise rates in order to cover increasing costs required to run the utility.

City groups who intervene in rate cases analyze the utility’s filings and make specific, targeted recommendations to ensure reliable service and reasonable rates. Recently, city groups successfully negotiated a lower increase with TNMP in its base rate proceedings than it originally requested. In fact, cities’ participation regularly reduces the authorized increase from the original utility request. In sum, all ratepayers benefit from municipal participation in rate cases, as these city groups are often the most powerful consumer advocates and affect the most change in overall authorized rate increases.

Conclusion

Calendar year 2019 will be an eventful and contentious year for the PUC, as it navigates its way through the first wave of base rate proceedings required by its new Rule. These proceedings will impact municipalities acting as regulatory authorities, as well as ratepayer citizens. Municipalities must remain vigilant of these proceedings for not only how the proceedings impact them directly, but how ratemaking precedent may be established that could have far-reaching impacts on future rate cases. If you think your city will be affected by one of these rate cases, please contact us for more information.


Patrick Dinnin is an Associate in the Firm’s Energy and Utility Practice Group, and his practice focuses on a wide range of utility regulatory and ratemaking matters. If you would like additional information or have questions related to this article or other matters, please contact Patrick at 512.322.5848 or pdinnin@lglawfirm.com.

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