Locke Lord QuickStudy: The Storm After the Storm: Texas PUC Issues Emergency Orders Affecting Retail Electric Providers

The Public Utility Commission of Texas has issued a series of orders since Friday, February 19, 2021 to address the potential of mass transitions of retail electric customers and retail billing issues resulting from the extreme weather event last week.

February 19th PUC Order, Delegation of Authority to the Executive Director and Granting Exception to the Commission’s Rules (Project Nos. 50500 and 51812)

On Friday, February 19, 2021, the Texas PUC held an emergency meeting and voted to approve an order related to the designation of Retail Electric Providers (“REPs”) to serve as Volunteer Retail Electric Provider (“VREP”) because of the potential of mass transitions of retail electric customers to Providers of Last Resort (“POLR”).  The Order was not filed until this morning. See attached.

In sum, the Feb. 19th Order:

(1) approved TXU Energy Retail’s request to expand the number of ESI IDs it can serve as a VREP in a mass transition event;

(2) approved Reliant Energy Retail’s request to be designated as a VREP to serve residential and small commercial customers in a mass transition event;

(3) allowed REPs to file by today a request to be designated as a VREP to serve retail customers in a mass transition event; and

(4) delayed any mass transitions until Wednesday, Feb. 24, 2021.

The PUC Chairman said the intent of the Order is to provide time for additional VREPs to be in place and for any potential voluntary acquisitions of retail customers to complete prior to any POLR/VREP mass transition. See the updated list of VREPs for each customer segment attached to the Commission’s Feb. 19th Order.

Background and More Detail

The volunteer POLRs (VREPs) are required to charge a, "market-based, month-to-month product," rather than the higher POLR rate that is based on wholesale clearing prices (the real time settlement point prices, which can be up to $9.00 per kilowatt hour plus an adder).

On Thursday, TXU Energy Retail filed a request to increase the number of customers it is willing to serve as a Volunteer Retail Electric Provider (“VREP”).  TXU Energy stated that it would accept as a VREP all of the customers who may be part of a mass transition from REPs as early as today.  Also on Thursay, Reliant Energy Retail filed a request to be designated as a VREP for the 2021 through 2022 term for residential and small commercial customers.

POLR Mass Transition Timeline under ERCOT Protocols

ERCOT Protocols set forth the payment deadlines and process for a mass transition of retail customers due to a REP’s failure to make any payment due to ERCOT. Note that Feb. 21st PUC emergency order authorized ERCOT to use its discretion in enforcing these timelines and the PUC’s Feb. 19th Order described above requires that any Mass Transitions will not occur any earlier than Wednesday, Feb. 24th.

• Payments to ERCOT by a Market Participant are due by close of the Bank Business Day on which the amount is due (Protocol 16.11.6(1)).  Failure to pay any payment when due is a Late Payment and constitutes an event of Payment Breach (16.11.6(3)) and ERCOT may impose remedies for Payment Breach under 16.11.6.1.  If a Late Payment (including a partial Late Payment) is made, then ERCOT has sole discretion to waive Payment Breach (see 16.11.6.1(5)).  One of ERCOT’s remedies for Payment Breach is to revoke the REP’s (called a Load Serving Entity/LSE in Protocols) ability to conduct activities under the protocols (i.e. revoke market participant registration); within 24 hours of receiving the notice of Payment Breach, the LSE must provide all information regarding its ESI IDs to ERCOT and, upon revocation of some/all of the LSE’s rights and notice to that LSE and to PUC, ERCOT “shall” initiate a Mass Transition of the LSE”s ESI IDs without the need for any order or action from the PUC.
  
  
• Retail Market Guide § 9, Appendix F2 gives typical timeline for initiating mass transition to POLR, however ERCOT can deviate from this as directed by applicable legal authorities (including PUC): Day -1 ERCOT legal confirms default; Day 0 ERCOT sends 814_03 requesting Mass Transition Date; Day 2 (i.e. Day 0 + two days) is the Mass Transition Date on which the POLR is responsible for the ESI IDs and the TDSP performs meter reads for those ESI IDs; Day 5 is the date that TDSP sends 867_04s to ERCOT and ERCOT forwards these to POLR.  The Mass Transition is complete as of Day 5.

February 21, 2021 Orders

On Feb. 19th, the PUC adopted two orders: (1) authorizing ERCOT to use its sole discretion in enforcing the protocols regarding collateral calls and payments of settlement invoices; and (2) prohibiting all disconnection for non-payment in competitive retail areas until further notice and required REPs to offer deferred payment plans to residential and small commercial customers upon request.  See attached Orders, as well as a PUC news release and explainer doc posted to the Commission’s website.

In the emergency Feb. 21st Open Meeting, the Commissioners noted that credit issues are impacting ‎market participants in ERCOT, and that the orders are intended to give the PUC, Governor’s office and ‎Legislature time to figure out solutions to the financial issues. The Commission also “strongly urged” ‎REPs to not send any invoices to residential and small commercial customers and for Transmission and ‎Distribution Utilities (“TDUs”) to not send any meter reading data based on estimated usage from last ‎week “until we figure out how to financially manage the situation we are in.”‎

1. Order Directing ERCOT to Take Action and Granting Exception to ERCOT Protocols (Project No. ‎‎51812)
   

• Authorized ERCOT to use its discretion to take the following actions:
  
  

• Deviate from protocol deadlines  and timing related to settlements, collateral obligations, and invoice payments;
• Utilize available funds, such as undistributed congestion revenue right auction revenues, to cover market participant who cannot pay settlement invoices;
• Relax credit requirements and release cash or other collateral to provide short-term market-participant liquidity
• Deviate from protocol requirements regarding the maximum amount of default uplift invoices;
• Suspend breach notifications to certain market participants for failure to make payment or provide financial security; and
• Produce reconciliation settlements following market stabilization.
  
  

2. Order Directing Certain Actions and Granting Exceptions to Certain Rules (Project No. 51812)
   
   

• Prohibits REPs and TDUs from disconnecting any retail customer for non-‎payment. This does not apply to electric cooperatives or municipal electric utilities.‎
• Prohibits REPs from assessing late fees on residential or small commercial customers
• REPs must continue to offer a deferred payment plan to residential and small ‎commercial customers upon request.‎
• Note that although the Commission “strongly” urged REPs to not send any bills to ‎residential and small commercial customers, the Commission did not include that ‎prohibition in the Order. ‎
  
  
  

February 23, 2021 ERCOT Market Notices

This morning, Feburary 23, 2021, ERCOT issued two Market Notices regarding actions it is taking under the ERCOT Protocols to help resolve financial obligations between Market Participants and ERCOT.

1. ERCOT ended its temporary deviation from Protocol deadlines and timing related to settlements, collateral obligations, and invoice payments. Invoices and settlement will be executed in accordance with Protocol language.
   
   
2. ERCOT is continuing to use its discretion authority under the PUC’s February 21st Order Directing ERCOT to Take Action and Granting Exception to ERCOT Protocols to help protect the overall integrity of the financial electric ERCOT market. For example, ERCOT will begin using up to $400 million in undistributed Congestion Revenue Right (CRR) auction revenue to assist in covering short-paying Invoice Recipients.  ERCOT further stated that while the PUC has provided ERCOT with discretion to take actions to help mitigate financial defaults and Market uplift resulting from short-paying Market Participants, such actions by ERCOT will only provide financial support to address the Market’s current liquidity issues.  ERCOT is encouraging Counter-Parties and their represented Resource Entities and Load Serving Entities to explore all available financial and/or business transition options at this time.

Locke Lord’s Texas energy attorneys are closely following the developments at the Texas PUC in the ‎aftermath of last week’s crippling storm. Please contact Carrie Collier-Brown or any of our energy ‎attorneys to discuss the steps your organization should be taking in response to these developments ‎and going forward