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TITLE 16ECONOMIC REGULATION
PART 2PUBLIC UTILITY COMMISSION OF TEXAS
CHAPTER 25SUBSTANTIVE RULES APPLICABLE TO ELECTRIC SERVICE PROVIDERS
SUBCHAPTER JCOSTS, RATES AND TARIFFS
DIVISION 2RECOVERY OF STRANDED COSTS
RULE §25.263True-up Proceeding

    (B) the total differential between the net PTB and the market price of electricity calculated for the applicable class under paragraph (3) or (4) of this subsection.

  (6) All REPs shall provide information to the independent third party as needed for the performance of calculations set forth in paragraphs (3) and (4) of this subsection. All data used in the calculations performed by the independent third party will remain confidential but shall be subject to audit by the commission.

  (7) The functions of the independent third party shall be funded by the AREPs through one or more assessments made by the commission.

(k) Regulatory assets. To the extent that any amount of regulatory assets included in a TC or CTC exceeds the amount of regulatory assets approved in a rate order which became effective on or before September 1, 1999, the commission shall conduct a review during the true-up proceeding to determine any such amounts that were not appropriately calculated or that did not constitute reasonable and necessary costs. In addition, to the extent that any amount of regulatory assets approved for securitization in a commission financing order was not subsequently included in an issuance of transition bonds, that amount of regulatory assets shall be included in the TDU/APGC true-up balance under subsection (l) of this section.

(l) TDU/APGC True-up balance.

  (1) The formula to establish the true-up balance between the TDU and APGC is shown in the following table. TDUs described in subsection (d)(3) of this section and their APGCs shall insert zero for all inputs in this equation except the input entitled "Final fuel balance calculated pursuant to subsection (h)."

Attached Graphic

  (2) For TDUs described in subsection (d)(2) of this section, the TDU/APGC true-up balance shall be compared to projected stranded costs as provided in subparagraphs (A) - (C) of this paragraph. For TDUs described in subsection (d)(3) of this section, the TDU/APGC true-up balance shall be treated as provided in subparagraph (D) of this paragraph.

    (A) If the TDU/APGC true-up balance is positive, and greater than projected stranded costs, then the commission shall increase the CTC (or establish a CTC, if no CTC has previously been approved for the utility), extend the time for the collection of the CTC, or both, to enable the TDU to collect the TDU/APGC true-up balance. The utility may seek to securitize any or all of the amounts determined under this subparagraph under PURA Chapter 39, Subchapter G.

    (B) If the TDU/APGC true-up balance is positive, but less than projected stranded costs, then the commission shall reduce nonbypassable delivery rates in the amount of the difference by:

      (i) reducing any CTC established under PURA §39.201;

      (ii) reversing, in whole or in part, the depreciation expense that has been redirected under PURA §39.256;

      (iii) reducing the TDU's rates; or

      (iv) any combination of clauses (i), (ii), and (iii) of this subparagraph.

    (C) If the TDU/APGC true-up balance is negative, then

      (i) any CTC established under PURA §39.201 shall be eliminated;

      (ii) net mitigation shall be reversed until exhausted or until a zero true-up balance is achieved, and the amount of net mitigation reversed shall be returned to ratepayers by the APGC through an excess mitigation credit; and

      (iii) if net mitigation is exhausted and some amount of the negative true-up balance remains, then for companies that have securitized regulatory assets, a negative CTC shall be established based upon the lesser of the absolute value of the remaining negative true-up balance or the securitization amount on which any TCs are based. If the company has been issued a financing order by the commission authorizing the securitization of regulatory assets but securitization has not yet occurred, then the negative CTC will be implemented at the time the securitization bonds are issued. If the company has not received a financing order from the commission authorizing securitization of regulatory assets, then no negative CTC shall be established for purposes of this subsection.

    (D) If the TDU/APGC true-up balance is positive, then a CTC shall be imposed to enable the APGC to recover any positive fuel balance. If the TDU/APGC true-up balance is negative, then a fuel credit shall be implemented to return the over-recovered fuel balance to ratepayers.

  (3) The TDU shall be allowed to recover, or shall be liable for, carrying costs on the true-up balance. This provision shall apply to all amounts the commission has authorized to be collected under this section that have not been securitized. Carrying costs on the unrecovered true-up balance shall be calculated from January 1, 2002, until the true-up balance is fully recovered. Based on the filing described below that is made within 30 days of the effective date of this rule, carrying costs shall be calculated using an interest rate determined as follows.

    (A) The TDU shall file an application to adjust the carrying costs and amend its CTC tariff on a prospective basis in conformance with this paragraph within 30 days of the effective date of an amendment to this paragraph. The establishment of the interest rate used to calculate carrying charges shall be based upon the following:

      (i) The weighted average of the TDU's unadjusted historical cost of debt (HC) and an adjusted form of the TDU's marginal cost of debt (MC), with the weightings based on the utility's most recently authorized capital structure. The HC component shall be the cost of debt as determined in a final commission order, provided that the order was entered within three years of the effective date of this rule, for a rate proceeding in which the TDU's cost of debt was explicitly addressed or can be determined based upon the order's authorized weighted-average cost of capital (overall rate of return on invested capital), proportions of debt and equity, and allowed return on equity. The MC component shall be based upon the average yield for long-term bonds of public utilities with the TDU's current credit rating during the three-month period preceding the filing, as published in Moody's Credit Perspectives (or a similar publication if Moody's Credit Perspectives is not available). Additionally, the MC component shall be adjusted--i.e., grossed-up--for the effects of federal income taxes. The following formula shall be used to determine the weighted-average carrying cost described above: CTC Carrying Charge Rate = MC * Equity Proportion of Most Recently Authorized Capital Structure * 1/(1-Tax Rate) + HC * Debt Proportion of Most Recently Authorized Capital Structure.

      (ii) If the commission, within three years prior to the effective date of this rule, did not enter a final order in a rate proceeding that addresses the TDU's cost of debt, the HC component used in the interest rate determination described in the preceding clause shall be based upon the cost of debt reported in the utility's most recent Earnings Monitoring Report filed pursuant to §25.73 of this title (relating to Financial and Operating Reports), adjusted for known and measurable changes.

    (B) In each rate case for the TDU, the calculation of carrying costs on the TDU's unsecuritized true-up balance shall be reviewed and adjusted to reflect authorized changes in the TDU's capital structure and cost of debt. Further, to reflect the effect of the CTC carrying charge rate across the entirety of the TDU's recoverable regulated assets, a composite rate of return incorporating the CTC carrying charge rate may be applied to both the unsecuritized true-up balance and the TDU rate base. The composite rate of return shall be calculated as follows: Composite Pre-Tax Rate of Return = CTC Carrying Charge Rate * Unsecuritized True-up Balance / (Unsecuritized True-up Balance + TDU Rate Base) + TDU Authorized Pre-Tax Weighted-Average Cost of Capital * TDU Rate Base / (Unsecuritized True-up Balance + TDU Rate Base).

(m) TDU/AREP true-up balance. The TDU shall bill the AREP for, and the AREP shall remit to the TDU, the amount calculated pursuant to subsection (j) of this section, plus carrying costs. Carrying costs shall be calculated in accordance with subsection (l) of this section and shall be calculated for the period of time from the date of the true-up final order until fully recovered. The commission may reduce the TDU's rates to reflect the amounts due from the AREP.

(n) Proceeding subsequent to the true-up.

  (1) The TDU shall file an application to adjust its rates within 60 days following the issuance of a final, appealable order in its true-up proceeding. In the proceeding, the commission may adjust the TDU's rates and any CTC, in accordance with PURA §39.262(g), and any excess mitigation credit. The commission may also allocate the recovery responsibility for such rates and any CTC to the TDU's customer classes.

  (2) In the proceeding, the commission shall also consider adopting remittance standards, if necessary, with respect to the credits or bills as among the TDU, the APGC, and the AREP.


Source Note: The provisions of this §25.263 adopted to be effective December 24, 2001, 26 TexReg 10498; amended to be effective August 7, 2003, 28 TexReg 5993; amended to be effective June 2, 2004, 29 TexReg 5338; amended to be effective July 20, 2006, 31 TexReg 5603

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