Energy and Utility: COVID-19 Update

by Thomas Brocato

PUC Takes Actions to Address Coronavirus Threat

The Public Utility Commission of Texas (PUC, or Commission) has joined other state agencies and entities in adopting measures to address the rapidly growing threat presented by the coronavirus disease 2019 (COVID-19).

On March 16, 2020, the PUC conducted an emergency open meeting regarding Docket No. 50664, Issues Related to the State of Disaster for Coronavirus Disease 2019. The Commission announced that PUC Staff would be telecommuting until further notice, and that the PUC will be suspending requirements for filings to be provided in hard copies. For now, the PUC requests electronic filings only (unless the material is confidential or voluminous).

The commissioners designated the coronavirus threat as a public emergency, giving the PUC the authority to suspend its rules for different filing requirements and deadlines.

On March 26, 2020, the PUC exercised its emergency authority to issue three orders. The first Order provides exceptions to existing PUC rules for electric, water, and sewer utilities, and requires electric utilities to provide eligible customers with deferred payment plans (DPPs). The second Order is an accounting order that allows regulated utilities to create a regulatory asset to track costs associated with the effects of COVID-19. The third Order establishes the COVID-19 Electricity Relief Program, which is a mechanism that will protect Texas citizens impacted by the COVID-19 emergency and provide certainty to the electric utilities and retail electric providers for recovery of unpaid utility bills.

Exceptions to PUC Rules and Requirement for REPs to Offer DPPs

Initially, at the PUC’s March 16, 2020 emergency open meeting, the commissioners had asked utilities to take voluntary action to suspend the practice of disconnecting residential customers for non-payment of their bills. However, at the March 26, 2020 open meeting, the Commission ordered exceptions to its rules for electric, water, and sewer utilities, prohibiting the assessment of late fees and disconnection of customers when they cannot pay their utility bills.

Additionally, the Commission ordered Retail Electric Providers (REPs) to provide DPPs to customers upon request. A DPP is a mechanism that allows a customer with a past-due balance to pay that balance over the course of several months. However, when a customer enters a DPP with a REP, the customer is placed on a switch-hold, which prevents that customer from switching to different REP until that DPP is paid.

The Order does not require water utilities to offer a DPP because water utilities are already required to offer a DPP under the PUC’s rules when any bill is more than three times the average bill for the customer. Water utilities are encouraged to offer a DPP to any residential customer who cannot pay all at once but is willing to pay in installments. The exceptions from the PUC’s Order, however, temporarily prevents a water utility from charging interest on DPPs.

This Commission Order, featuring the exceptions to the rules and the requirement for REPs to offer DPPs, is effective until Governor Abbott’s disaster declaration is terminated.

Accounting Order, Establishing a Regulatory Asset

The Commission also approved an accounting order, authorizing an accounting mechanism and subsequent process through which regulated utilities may seek future recovery of expenses resulting from the effects of COVID-19. Electric, water, and sewer utilities may record as a regulatory asset expenses resulting from the effects of COVID-19. These expenses can include non-payment of customer bills, as well as other costs, such as the cost to have facilities cleaned and disinfected. In future proceedings, the Commission will consider whether each utility’s request for recovery of these regulatory assets is reasonable and necessary. The Commission will also consider other issues at a future proceeding, such as the appropriate period of recovery for approved amounts.

The COVID-19 Electricity Relief Program

The Commission’s third Order approved at the March 26, 2020 open meeting establishes the COVID-19 Electricity Relief Program (CERP). CERP is a customer assistance program for residential customers that meet PUC established criteria proving that they have been affected by the COVID-19 outbreak. In addition to the protections for these customers established by the first order, CERP establishes a mechanism for Transmission and Distribution Utilities (TDUs) and REPs to recover costs from customers who cannot pay their utility bills.

This Order establishes a CERP fund, which will be funded by a rider to utilities’ existing rates. Utilities are allowed to establish a regulatory asset to track the costs related to the effects of the COVID-19 outbreak, and those costs will ultimately be reimbursed by the CERP fund. The rider will be based on $0.33 per megawatt hour, and utilities are required to implement it within ten days of the Order, effective immediately.

Initial contributions to the CERP fund will be paid by ERCOT. Utilities are required to estimate the amount of reimbursement requests that they will receive, and ERCOT will provide that amount (up to $15 million). If the initial amount requested is not enough to cover the TDU and REP costs, the TDU can file a request for an adjustment to the rider at any point during the CERP’s existence. TDUs and REPs will be reimbursed for costs related to COVID-19 from the CERP fund.

Only certain residential customers are eligible for special treatment under CERP. A residential customer must be unable to pay the utility bill due to unemployment or low income because of the effect of the COVID-19 outbreak. When a customer informs the REP that he or she cannot pay, the REP is required to offer a DPP and direct customer to a third-party administrator, the Low-Income List Administrator (LILA). Once the customer has contacted LILA, they will have to provide attestation of unemployment (followed by documentation of unemployment within 30 days) and sufficient information to identify the customer’s account (address, account number and telephone number). The LILA will compare the customer’s information to the lists of customers submitted by REPs, which will deem the customer eligible for CERP funds.

Each REP will retrieve the list from LILA and request reimbursement of those customers’ unpaid balances. REPs will cease submitting disconnection for non-payment orders from these eligible customers, and TDUs will cease charging REPs for delivery charges related to these customers. Additionally, the Order imposes reporting requirements on TDUs and REPs to track monthly reimbursements.

The Commissioners explained that the time period for the CERP is intended to track Governor Abbott’s Executive Order GA-08, which limits social gatherings and requires the closure of certain businesses. The CERP, including the suspension of disconnections and the addition of eligible customers, will end six months after the Order. However, if the governor has not lifted GA-08 at the end of the six-month period, the PUC may extend the CERP and the related protections.

The Order specifies that the TDUs’ riders will remain in place after the CERP has ended, until the regulatory asset costs have been recovered and reimbursements are disbursed to REPs, TDUs, and ERCOT. Final claims for reimbursement must be submitted no later than 90 days after the end of CERP. If the rider over-recovers funds, those funds will be refunded to customers. The PUC may make additional changes to these Orders, as the COVID-19 landscape changes every day. As the PUC announces anything related to the coronavirus, we will provide updates.

Railroad Commission Adopts Measures to Address Coronavirus Threat

The Railroad Commission of Texas (“RRC”) has also joined other state agencies and entities in adopting measures to address the rapidly growing threat presented by the novel coronavirus.

The RRC’s March 31, 2020 Open Meeting was cancelled. Additionally, the RRC is no longer accepting in-person filings. Parties may submit filings via U.S. Postal Service, FedEx or United Parcel Service.

Further, on its website, the RRC has announced that most of its employees will be telecommuting, with the exception of a limited skeleton crew. This will be in effect from Tuesday, March 17 until further notice.

The RRC has also provided a link to important resources for the public and for operators at the following web address: rrc.state.tx.us/covid19/
The public can still contact RRC Staff who are teleworking to ask questions about the energy industry, and industry operators can still contact the RRC about filings and processing. The RRC has also provided a 24-hour emergency number to report environmental emergencies.

The RRC has established a process for operators, utilities, and other licensed companies and individuals to request a waiver from regulatory requirements. Entities may request waivers of RRC regulations by providing justifications as to why the regulatory requirements cannot be met. The RRC will review the waiver requests on a case-by-case basis and determine whether to accept or deny the request.

As the RRC announces changes related to the coronavirus, we will provide updated information.

This summary was prepared by Thomas Brocato, Principal in the Firm’s Energy and Utility Practice Group. If you would like additional information related to this article or other matters, please contact Thomas at 512.322.5857 or tbrocato@lglawfirm.com.