(a) Purpose. This section establishes the parameters under which an electric utility shall offer customer choice for 5.0% of the load in its Texas service area beginning on June 1, 2001, through the implementation of retail competition pilot projects. The commission may use these pilot projects to evaluate the ability of each power region to implement full customer choice on January 1, 2002, including the operational readiness of support systems. The pilot projects conducted under this section also will serve to encourage participation in a competitive retail market and to inform customers about customer choice.

(b) Application.

(1) This section applies to an electric utility as defined in the Public Utility Regulatory Act (PURA) §31.002(6). An electric utility exempt from PURA Chapter 39 in accordance with PURA §39.102(c) may conduct a customer choice pilot project consistent with the requirements of this section upon expiration of its exemption. A pilot project commencing before the adoption of this section may fulfill portions of the requirements of this section, as determined by the commission.

(2) Other entities, including retail electric providers (REPs) certified by the commission, and aggregators, power generation companies, and power marketers registered with the commission may participate in the pilot projects under the terms and conditions established by this section.

(c) Intent of pilot projects. Pilot projects conducted under this section are intended to implement customer choice for all applicable customers in the same manner in which full customer choice will be offered starting January 1, 2002, to the extent practicable. Unless determined otherwise through a subsequent commission proceeding, or unless stated otherwise in this section, all pilot project participants who are not retail customers shall abide by all applicable commission rules, including but not limited to, rules relating to customer protection and transmission and distribution terms and conditions, and all rules of an independent organization as defined in PURA §39.151.

(1) Utility's obligation to serve. A utility shall continue to provide electric service in accordance with PURA and the commission's substantive rules to requesting customers in its certificated service area who do not wish to take service from a REP.

(2) Indemnification. Market participants, including utilities, shall be held harmless for any damages resulting from any non-willful system or process failures during the pilot project.

(3) Performance standards. (A) Call center performance may be compromised by potential large increases of customer inquiries generated because of the customer education program and pilot project activities. For the period February 1, 2001 through December 31, 2001, as applicable to each utility, (i) a reduction of five percentage points will be applied to the percentage of calls to be answered in the allowable time; or (ii) 5.0% of the calls with the longest wait time will be subtracted from the calculation of average answer time. (B) An affected utility shall track and report such performance during the pilot project in accordance with applicable commission rules and orders. An affected utility does not waive any rights to request an adjustment or waiver of performance standards directly affected by the customer education program or pilot project.

(4) Effect of pre-existing service agreements or contracts. (A) To the extent a customer is otherwise eligible to participate in a pilot project in accordance with this section, a utility shall not challenge a customer's right to participate: (i) based upon a claimed failure to provide notice of cancellation in accordance with the requirements of an existing service agreement, contract, or tariff; or (ii) in the event that the customer's service agreement or contract is beyond its primary term. (B) To the extent a customer is otherwise eligible to participate in a pilot project in accordance with this section, customers in the primary term of a service agreement or contract shall have the right to participate in the pilot project subject to a challenge by the utility based upon a service agreement or contractual issue other than failure to provide notice of cancellation in compliance with an existing service agreement, contract, or tariff. The procedure for any such challenge shall be as follows: (i) A utility contending that a customer that has been otherwise selected to participate in the pilot project is not eligible to participate, because of an existing service agreement or contract in its primary term, shall inform the customer not later than seven days after the date scheduled for the lottery for the applicable class in the event the class is oversubscribed or the date the customer requests participation in the event the class is undersubscribed. (ii) If the customer wishes to dispute the utility's contention, the customer must, within seven days of receipt of the utility's notification, so inform the utility. Pending resolution of the dispute, the utility shall reserve a place for that customer on the participant list. (iii) The customer shall be entitled to participate in the pilot project unless the utility informs the commission of the pilot project eligibility dispute within seven days of receipt of the customer's notification to the utility disputing the claim of ineligibility. Upon receipt by the commission of timely notice of the dispute, the commission will resolve the dispute within 30 days after filing, and may do so administratively. (iv) If the commission determines that the customer is eligible to participate, the customer will be included within the pilot project as soon as practicable after the decision.

(5) Right to withdraw from pilot project. For any reason, and at a customer's request, the REP and the incumbent utility shall restore a residential customer's account to pre-pilot project services and rates. In the event a customer's REP ceases to do business in Texas during the pilot project, the incumbent utility shall restore any customer's account to pre-pilot project services and rates at the customer's request.

(6) Application of renewable energy rule. To encourage access to energy generated from renewable resources by customers participating in the pilot projects, the renewable energy mandate provisions of §25.173 of this title (relating to Goal for Renewable Energy) will be extended on a voluntary basis during the pilot projects to the competitive portion of the market, with the following changes: (A) Each REP may acquire and retire renewable energy credits (RECs) consistent with its share of retail kilowatt-hour sales during the pilot period (June 1, 2001 through December 31, 2001), at a rate consistent with REC obligations for the year 2002, and in the manner specified in §25.173(h) of this title; (B) Each REC retired for the pilot period will reduce the REC obligations of the REP for the year 2002 compliance period; (C) The voluntary settlement period for the pilot project renewable energy program will commence January 1, 2002 and end March 31, 2002; and (D) Penalty provisions of §25.173(o) of this title are not applicable.

(7) End of pilot projects. The pilot projects will end on December 31, 2001, unless determined otherwise by the commission in accordance with subsection (j) of this section. For an electric utility exempt from PURA Chapter 39 in accordance with PURA §39.102(c), the pilot project, if undertaken, will begin and end on dates deemed reasonable by the commission. A customer will remain with the REP by which he or she was served on the last day of the pilot project until the customer or the REP elects otherwise. By participating in the pilot project, a customer does not waive any right to take service under the price to beat in accordance with PURA §39.202.

(d) Definitions. The following terms when used in this section shall have the following meanings unless the context clearly indicates otherwise:

(1) Aggregation--includes the purchase of electricity from a retail electric provider, a municipally owned utility, or an electric cooperative by an electricity customer for its own use in multiple locations or as part of a voluntary association of electricity customers. An electricity customer may not avoid any non-bypassable charges or fees as a result of aggregating its load.

(2) Customer class--a grouping of customers, specific to the pilot projects, for the purpose of allocating loads available for customer choice during the pilot projects. The five customer classes used in the pilot projects are: (A) Residential--all customers identified by an electric service identifier (ESI) who purchase electricity under a utility's residential rate schedule. (B) Non-residential, non-demand metered--all customers identified by an ESI who: (i) do not purchase electricity under a utility's residential rate schedule; and (ii) do not purchase electricity under a utility's municipal or school rate schedule; and (iii) do not purchase electricity under a utility's rate schedule that is based on metered or estimated demand during the twelve month period ending December 31, 2000. (C) Industrial demand-metered--all customers identified by an ESI who: (i) do not purchase electricity under a utility's residential rate schedule; and (ii) purchase electricity under a utility's rate schedule that is based on a metered demand; and (iii) purchase electricity under a utility's industrial rate schedules (or are identified as industrial by the utility's rate code if the utility does not have industrial rate schedules) or have filed a manufacturing or processing tax exemption certificate with the utility. (D) Commercial and all other demand-metered--all customers identified by an ESI who: (i) do not purchase electricity under a utility's residential rate schedule; and (ii) do not come within the definition of the industrial demand metered customer class; and (iii) purchase electricity under a utility's rate schedule that is based on a metered demand. (E) Other--The other customer class is composed of all customers identified by an ESI who: (i) purchase electricity under a utility's rate schedule that is based on known usage patterns, not actual metered data (i.e., unmetered loads); or (ii) purchase electricity under a utility's municipal or school rate schedules; or (iii) purchase electricity under utility rate schedules applicable to seasonal agricultural use, such as cotton gins, irrigation, or grain elevators.

(3) Electric service identifier (ESI)--premise-based identifier assigned to each electric service delivery point between a transmission and distribution utility and an end-use load, which is used in the Texas customer registration system and the Electric Reliability Council of Texas (ERCOT) settlement system.

(4) Lottery--fair process in which ESIs or aggregator packets of ESIs are selected for participation in a pilot project by using standard statistical methods for simple random sampling; each ESI or aggregator packet of ESIs should have an equal chance of actually being selected.

(5) Participation--occurs when the customer takes service from a retail electric provider that is not the incumbent, integrated utility.

(e) Requirements for participants that are not retail customers.

(1) A REP must be certified by the commission pursuant to §25.107 of this title (relating to Certification of Retail Electric Providers) prior to participating in pilot projects established pursuant to this section. An affiliated REP shall not participate in the certificated service area of the electric utility with which it is affiliated.

(2) An aggregator, other than a self-aggregator, must be registered with the commission pursuant to §25.111 of this title (relating to Registration of Aggregators) prior to participating in pilot projects established pursuant to this section.

(3) A power generation company must be registered with the commission pursuant to §25.109 of this title (relating to Registration of Power Generation Companies) prior to participating in pilot projects established pursuant to this section. A utility need not be registered as a power generation company in order to generate power for sale during the pilot projects.

(4) A power marketer must be registered with the commission pursuant to §25.105 of this title (relating to Registration and Reporting by Power Marketers) prior to participating in pilot projects established pursuant to this section.

(5) An independent transmission organization outside of ERCOT may require a market participant to register with that organization in order to become a wholesale buyer and seller of energy across the transmission system.

Cont'd...