Electric providers of last resort chosen in Texas

By Ann de Rouffignac
OGJ Online

HOUSTON, July 26, 2001 – The Texas Public Utility Commission selected electricity retailers who will become suppliers of last resort in the event companies go out of business or leave the market when competition begins next year in Texas.

The so-called provider of last resort (POLR) will have to serve customers without notice.

“There was not exactly a land rush to apply for this,” said PUC spokesman Terry Hadley. The PUC appointed POLRs for two territories in Texas. TXU Corp., Dallas, successfully bid for the remainder of the Texas market except its own service territory. TXU is prohibited from bidding on its own territory, and there is still no POLR for a large part of it.

The PUC appointed Entergy Solutions Essentials, a unit of Entergy Corp., New Orleans, to be POLR for Southwestern Electric Power Co. (SWEPCO)’s territory in northeast Texas. The PUC and SWEPCO, a unit of American Electric Power Co. Inc., Columbus, Ohio, negotiated a contract to provide the service at 10.2-/kw-hr during off peak hours and 12.2-/kw-hr during summer peak months, said Hadley.

The PUC also appointed First Choice Power, a unit of TNP Enterprises Inc., Fort Worth, to serve the western part of TXU’s service territory. It will charge residential customers 9.9-/kw-hr for off peak use and 11.9-/kw-hr for peak use.

TXU will serve customers without access to other service in Reliant HL&P’s territory at a rate of 13.4-/kw-hr for off peak use and 16.4-/kw-hr during peak months. The utility unit of Reliant Energy Inc., Houston, was forbidden from bidding in its own territory.

The prices charged by POLRs are considerably higher than current rates of about 11-/kw-hr. Prices are higher because the company providing the service never knows how many customers it will have or for how long. Not being able to plan ahead for power and receiving customers who don’t always pay their bills increases the risk to the POLR, said TXU spokesman Chris Schein.

Once Reliant or any utility loses 40% of its existing residential customers to competitors, prices will be completely free to fluctuate with the market. If a competitor exits the market, then its customers can choose another provider, if there is one willing to accept them, or be assigned the POLR.

“The POLR is like a seatbelt,” said Schein. “You hope you never need it.”


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