Advocates Say Utility Clause Will Hurt Poor

The Fort Worth Star-Telegram ( September 04, 2001 )

AUSTIN - A provision within the state's electric deregulation law that could force some of the state's poorest residents to pay the most for electricity is drawing fire from consumer advocates.

Under the law, consumers who don't pay their bills - or those who lose service because their electric company goes belly up - get dumped to a relatively high-cost company known as "the provider of last resort," or POLR.

The Texas Public Utility Commission has yet to finalize a POLR contract for Fort Worth, although a recommendation by commission staff would make its rates at least 20 percent more expensive than current TXU Electric prices, consumer advocates said.

For POLR service in most other parts of Texas, the PUC has given the nod to TXU Electric. Consumer advocates said TXU's POLR electricity will cost Houston residents about 50 percent more than that sold by the city's traditional utility.

"This is gouging the poor," said consumer advocate Randy Chapman, executive director of Texas Legal Services Center. "Texas is going down the wrong road by putting low-income customers at rates that are higher than those charged today."

But TXU Electric spokesman Chris Schein said it costs more to serve POLR customers. He also said lower rates could undermine the deregulation law.

"As conceptualized by the Legislature, POLR service is a short- term solution for consumers," he said. "We don't want [the provider of last resort] to be a competitive provider. If you're charging [the same rates as the utility] then you're becoming a competitor, and then there's no incentive for a consumer to choose a new retail electric provider." Under deregulation, electric companies can compete with one another for residential and commercial business. The Texas deregulation law will open the state's retail market on Jan. 1, although a limited test project currently allows companies to compete for up to 5 percent of the market. POLR service in Texas will also begin Jan. 1, although a panel of lawmakers will probably review the issue Friday. State Rep. Steve Wolens, the Dallas Democrat who co-authored the Texas deregulation law, also has called for the PUC to conduct a Metroplex hearing on POLR services.

Chapman and other consumer advocates said POLR rates should not exceed the capped rates that the state's traditional utilities charge. They said the PUC should reconsider POLR rates already set in Houston and keep them affordable in the Metroplex.

Besides nonpayment, customers could get switched to the provider of last resort if their regular electric company goes out of business, or if the company suspends sales to residential customers or stops serving the customer's specific area.

Such customers would receive written notification that they have been switched to the POLR. The POLR could immediately demand advance payment of the estimated cost of electricity for the two hottest months of the year.

Chapman, of the Texas Legal Services Center, said customers who don't make the prepayment could get disconnected within 25 days. He said he sees no reason why POLR customers should pay more for electricity. "The beauty of what we currently have is that everybody pays the same price," Chapman said. "While there are a few deadbeats that will pick up and leave the state, people cannot do with electricity for very long and they'll beg and borrow money to pay back [ the utility ]. Termination notice is the ultimate collection hammer."

The PUC has selected Reliant Energy Retail Services to become the provider of last resort for the Fort Worth area. The PUC has yet to set rates, however, and Reliant Energy Services President Waters Davis warned that his company could easily lose money if rates are set too low. That's because the company cannot precisely forecast the size of the market.

Davis explained that such uncertainty would force Reliant - which would operate under the New Texas Energy Company trade name - to purchase electricity on the potentially high-cost spot market. TXU's Schein agreed. But he also noted that under Texas deregulation, low-income customers can apply for as much as a 10 percent discount on their electric bills.

"And you don't have to be with the POLR for any length of time," Schein said. "Theoretically, you could be there as short as a day, or as long as you want."

But state Rep. Sylvester Turner, a Houston Democrat, expressed concern that the POLR could become a permanent dumping ground for low-income customers. New electric competitors have no obligation to serve customers with bad credit, and the traditional electric companies would require a deposit before taking them back, he said.

Many low-income residents will not have enough money to both pay the high POLR rates and come up with a new deposit, he said. Turner is among those that have called upon the PUC to reconsider the issue.  "I fear that we're creating a system that's more damaging than the status quo," he said.

Kimberly Olsen, an organizer with the Dallas office of the Association of Community Organizations for Reform Now, has also requested that the PUC revisit the issue. She said ACORN members will attempt to raise the issue with lawmakers during a meeting Friday in Austin.

"We want [POLR service] to be a safety net - not a locked cage where poor poeple get stuck," Olsen said. "We see it [now] as the same-old, same-old. Poor people will have to pay more. We feel like our legislators sold us down the river when they let this happen."

Terry Hadley, a spokesman for the Texas Public Utility Commission, said the commission will take up the Metroplex POLR issue on Oct. 5 and set rates for service within two months. He also said the commission has agreed to reconsider the overall issue next year - after the transition to the new restructured electricity market.