1. (a) Purpose. The purpose of this section is to ensure that, as mandated by the Public Utility Regulatory Act (PURA) §39.106:

   1. (1) A basic, standard retail service package will be offered by a POLR at a fixed, non- discountable rate to any requesting customer in all Texas transmission and distribution utilities' (TDUs) service areas that are open to competition; and
   2. (2) All customers will be assured continuity of service if a retail electric provider (REP) terminates service in accordance with the termination provisions of the commission's Customer Protection Rules for Retail Electric Service.
2. (b) Application. This section applies to REPs that may be designated as POLRs in TDU service areas in Texas. This section does not apply when an electric cooperative or a municipally owned utility (MOU) exercises its right to designate a POLR within its certificated service area. However, this section is applicable when an electric cooperative delegates its authority to the commission in accordance with subsection (m) of this section to select a POLR within the electric cooperative's service area.

3. (c) Definitions. The following words and terms when used in this section shall have the following meaning, unless the context indicates otherwise:

   1. (1) Appointed POLR - A REP required to serve as POLR by the commission in the absence of a qualified winner of the competitive bidding process.
   2. (2) Awarded POLR - A REP selected by the commission to serve as POLR through the competitive bidding process.
   3. (3) Basic firm service - Electric service not subject to interruption for economic reasons and that does not include value added options offered in the competitive market. Basic firm service excludes, among other competitively offered options, emergency or back-up service, and stand-by service.
   4. (4) Default customer - A customer who is automatically assigned to be served by the POLR because the customer is no longer served by the customer's selected REP, including a customer who is unable to obtain electric service from a REP.
   5. (5) Designated POLR - A POLR who is either appointed by the commission or selected through a solicitation of bids.
   6. (6) Fixed rate - A rate that is established when the POLR is designated and does not change over the term of the POLR, except that the POLR rate may reflect changes due to non-bypassable charges. A fixed rate may be structured so as to reflect a seasonal differential.
   7. (7) Hedged rate - A rate that contains no market-indexed energy component. When a hedged rate is offered, it is up to the POLR to mitigate the risk associated with energy price fluctuations.
   8. (8) Large non-residential - A non-residential customer with a peak demand above one megawatt.
   9. (9) Non-discountable rate - A rate that does not allow for any deviation from the price offered to all customers within a class, except as provided by the rate reduction program of the commission's rules relating to the System Benefit Fund.
   10. (10) Provider of last resort (POLR) - A REP certified in Texas that has been designated by the commission to provide a basic, standard retail service package to requesting or default customers.
   11. (11) Requesting customer - A customer who voluntarily selects the POLR to provide electric service.
   12. (12) Residential customer - A customer taking service at the customer's place of residence provided it is not a master-metered, multi-family facility or a facility metered as a commercial facility.
   13. (13) Small non-residential customer - A non-residential customer with a peak demand of one megawatt or below.
   14. (14) Variable rate - A rate that results from a pricing mechanism that contains a market- indexed energy component and that may vary from time-to-time to reflect market energy price fluctuations.

4. (d) POLR service.

   1. (1) For the purpose of POLR service, there will be three classes of customers: residential, small non-residential, and large non-residential.

   2. (2) The POLR may be designated to serve any or all of the three customer classes in a POLR area. Within the customer class it is designated to serve, the POLR shall provide service to the following customers:

      1. (A) Any customer requesting POLR service; and
      2. (B) Any customer not receiving service from its selected REP for any reason who is automatically assigned to the POLR.

   3. (3) The POLR shall offer a basic, standard retail service package, which will be limited to:

      1. (A) Basic firm service;
      2. (B) Call center facilities for customer inquiries;
      3. (C) Standard retail billing (which may be provided either by the POLR or another entity);
      4. (D) Benefits for low-income customers as provided for under PURA §39.903 relating to the System Benefit Fund; and
      5. (E) Standard metering, consistent with PURA §39.107 (a) and (b) (which may be provided either by the POLR or another entity).
   4. (4) The POLR shall, in accordance with §25.108 of this title (relating to Financial Standards for Retail Electric Providers Regarding the Billing and Collection of Transition Charges), provide billing and collection duties for REPs who have defaulted on payments to the servicer of transition bonds or transmission and distribution utilities.

5. (e) Standards of service.

   1. (1) A REP who has been designated by the commission to serve as POLR for a class in a given area shall serve any or all requesting or default customers in that class.

   2. (2) A POLR shall abide by the applicable customer protection rules as provided for under Subchapter R of this chapter (relating to Customer Protection Rules for Retail Electric Service). In addition, the POLR shall be held to the following general standards:

      1. (A) The POLR shall inform any default customer assigned to it that it is now providing service to the customer and disclose all charges the customer will be responsible for;
      2. (B) The POLR shall provide default customers and any customer who inquires about selecting a provider a commission maintained list of certified REPs;
      3. (C) The POLR may not require that a customer sign up for a minimum term as a condition of service. When the POLR offers a level or average payment plan in accordance with the commission's customer protection rules, a residential or small non-residential customer who elects to receive service under such plan may be required to sign up for a minimum term of no more than six months.

6. (f) POLR rate.

   1. (1) The POLR rate shall be established through the competitive bidding process. In the event that the competitive bidding process fails under circumstances described in subsection (i)(3) of this section, the POLR rate may be established through negotiations between the commission and an appointed REP. If a REP is appointed to become the POLR in its affiliated transmission and distribution utility (TDU) service territory, the rate will be set at the price to beat (PTB) for residential and small non-residential customers prior to January 1, 2005 or until the affiliated REP loses 40% of its customers in each customer group.

   2. (2) Fixed non-discountable rate. The POLR shall offer one fixed rate for each class of customers identified in this section that will meet the following requirements:

      1. (A) the rate shall be non-discountable, except for the rate discount provided for by the rate reduction program of the commission's rules relating to the System Benefit Fund;
      2. (B) the rate shall be a hedged rate; and
      3. (C) the rate shall be seasonally differentiated.

7. (g) Separation of service. The POLR shall maintain separate accounts for its competitive REP business and its POLR business and keep its REP business separate from its POLR function. In addition, the POLR shall abide by the following provisions:

   1. (1) The POLR and its affiliated REP may share the same facilities, but the POLR shall have a separate phone number.
   2. (2) The POLR and its affiliated REP may share employees.
   3. (3) An employee answering the POLR phone line will read from a script to describe POLR service and will not market the services of the POLR's affiliated REP. If the customer asks about the services of the POLR's affiliated REP's, the employee may only give the caller the REP's telephone number.
   4. (4) The commission may authorize the registration agent of the Independent Organization to provide to REPs and aggregators a periodically updated mass customer list of customers served by the POLR containing information similar to the information that the registration agent is authorized to release under the commission's customer protection rules. The POLR's affiliated REP may not use the POLR's customer list to market its services unless the list is made available to other REPs through the registration agent.

8. (h) Transition from REP to POLR service.

   1. (1) POLR service for a requesting customer is initiated when the customer makes arrangements for service.
   2. (2) If the applicable Independent Organization, as specified by PURA §39.151, becomes aware that a REP is no longer scheduling for a customer, it will notify the POLR that the customer is switched to POLR service in accordance with the operating rules of the Independent Organization.
   3. (3) If the REP terminates service to a customer whose consumption is determined by monthly meter readings without giving notice, the POLR shall prorate the customer's usage based on the customer's historic data or load profile to establish the customer's charges for the relevant portion of the billing cycle, unless the customer requests and is willing to pay for an out-of-schedule meter read. Nothing in this section precludes a POLR from having an out-of-cycle meter read performed for a new customer on its own initiative provided the POLR does not pass on the cost of the meter read to the customer.
   4. (4) The POLR is responsible for obtaining resources and services needed to serve the customer once it has been notified that it is serving the defaulting REP's customers. The customer is responsible for charges for POLR service at the POLR rate from that time.
   5. (5) If a REP terminates service to a customer, it is financially responsible for the resources and services used to serve the customer until it notifies the Independent Organization of the termination of the service and until the switchover to the POLR is complete.
   6. (6) The POLR is financially responsible for all costs of providing electricity to customers from the time the switchover is complete until such time as the customer leaves POLR service.

9. (i) Selection of the POLR. The commission shall designate certified REPs, or REPs that have applied for certification and meet REP certification requirements, to serve as POLRs in areas of the State in which customer choice is in effect no later than June 1, 2001, and as required when the term of a POLR ends thereafter, except that the commission shall not designate the POLR in the service areas of MOUs or electric cooperatives unless an electric cooperative has delegated its POLR designation authority to the commission in accordance with subsection (m) of this section The first term for POLR service begins January 1, 2002 in all areas open for competition on that date.

   1. (1) The commission will use a competitive bidding process to select the POLR for each customer class in each designated POLR service area.

      1. (A) A bidder may submit a bid to serve the residential, small non-residential or the large non-residential class. A bidder may submit a bid for more than one class. Bids will be evaluated independently for each class.
      2. (B) A REP may not submit a bid to provide POLR service to the residential and small commercial customer classes in its affiliated TDU service territory during the years when the PTB is in effect. A REP may submit a bid to provide POLR service to non-PTB customers in its affiliated TDU territory.
      3. (C) The commission will consider bids for one-year or two-year terms.

   2. (2) The competitive bidding process fails if:

      1. (A) The commission does not receive any bids from qualified bidders for a given customer class in a given area; or
      2. (B) The terms and conditions of the bids received are unreasonable, as determined by the commission.

   3. (3) If, in a customer class or area, the competitive bidding process fails, the commission may investigate why the bidding process was unsuccessful and re-bid the service with modifications, or the commission may appoint any certified REP serving a customer class in an area to become the POLR for that customer class in that area. Additionally, for good cause the commission may use other options for appointing POLRs if the bid process fails. If a REP is appointed to serve as POLR, the following terms and conditions will apply:

      1. (A) The appointed REP will serve as POLR for a one-year term, or for such a period as the commission may reasonably designate.
      2. (B) The commission will not appoint an unwilling REP to serve in an area for two consecutive terms unless it finds that requiring such REP to serve two consecutive terms is in the public interest.
   4. (4) The affiliated REP may not be appointed to serve as POLR in its affiliated TDU area unless no other REP applies to serve that area or the commission rejects all bids for that area.
   5. (5) If the commission determines that the bidding process fails under paragraph (2) of this subsection, the commission will negotiate the POLR price for each customer class with the appointed REP. The commission shall negotiate the rate for each class separately to ensure cross subsidization among classes does not occur.
   6. (6) Before the POLR's term of service comes to an end so as to ensure timely continuation of service the commission shall repeat the initial selection process.
   7. (7) When a POLR's term of service comes to an end, responsibility for the POLR's customers will be transferred to the newly designated POLR.

10. (j) Termination of POLR status.

    1. (1) The commission may revoke a REP's POLR status:

       1. (A) If the POLR fails to maintain REP certification;
       2. (B) If the POLR fails to provide service in a manner consistent with the commission rule relating to POLR service after it is provided up to 60 calendar days' notice of the deficiency; or
       3. (C) At the commission's discretion for good cause provided the commission affords the failing POLR due process.

    2. (2) A POLR that wishes to terminate its obligations must inform the commission of the actions it is planning to take to ensure a smooth transition.

       1. (A) The departing POLR may, with the approval of the commission, transfer its POLR obligations to a qualified REP willing to assume the departing POLR's terms of service.
       2. (B) The departing POLR shall notify its customers and inform them of the transfer of POLR obligations to a new POLR at least 60 days before the transfer takes place.
       3. (C) If a POLR terminates its obligations without properly informing the commission and the customers and ensuring a smooth transition, the POLR will be subject to the penalties provided for in §25.107(j) of this title (relating to the Certification of Retail Electric Providers (REPs)).
    3. (3) If a POLR defaults or has its status revoked before the end of its term, the commission may appoint any certified REP serving a customer class in an area to become the POLR for that customer class in that area until a new POLR is awarded or appointed to serve at a negotiated rate. The conditions of service under subsections (d)-(g) of this section apply to the interim POLR.

11. (k) Procedures and criteria for POLR selection.

    1. (1) The general procedure for the request for proposals (RFP) to select the POLRs will be as follows:

       1. (A) The commission staff will develop an RFP for commission approval.
       2. (B) A commission staff evaluation team will evaluate the proposals submitted in response to the RFP.
       3. (C) The evaluation team will forward its recommendation to the commission.

    2. (2) The following threshold criteria will be used to determine whether bidders qualify:

       1. (A) Bidder's competence and qualifications, including prior REP experience. The bidder should demonstrate that it has retail experience and that it has staff with sufficient electric experience.
       2. (B) Quality of the bidder's activity plan, including its demonstrated readiness to provide service at the beginning of the term of POLR service.
       3. (C) Minimum standards for technical and managerial resources consistent with §25.107(g) of this title.
       4. (D) Minimum standards for financial strength consistent with §25.107(f) of this title.
    3. (3) The proposals of qualified bidders will be evaluated on the basis of the proposed rates for each customer class.
    4. (4) If two or more qualified bidders bid equal rates, the commission will enter into price negotiations with each bidder. If the tie is not resolved through negotiations, contribution to enhancement of market competitiveness will be the tie-breaking criterion.
12. (l) Service areas. The RFP will describe the service areas. The POLR service area should be no larger than an existing TDU service area, and may be smaller. When a TDU service area is divided into smaller areas, the commission will attempt to divide the service area so that the customer composition of the smaller areas will reflect that of the larger TDU service area.

13. (m) Electric cooperative delegation of authority. An electric cooperative that has adopted customer choice may propose to delegate to the commission its authority to select a POLR under PURA §41.053(c) in its certificated service area in accordance with this section. The commission will, at its option, accept or reject such delegation of authority. If the commission accepts the delegation of authority, the following conditions will apply:

    1. (1) the board of directors will provide the commission with a copy of a board resolution authorizing such delegation of authority;
    2. (2) the delegation of authority will be made at least 30 days prior to the time the commission issues a request for proposals to establish a POLR for a contiguous or surrounding TDU service area;
    3. (3) the delegation of authority will be for a minimum period corresponding to the period for which the solicitation will be made;
    4. (4) the electric cooperative wishing to delegate its authority to designate a POLR will also provide the commission with the authority to select the criteria and procedures to be used in selecting the POLR within the electric cooperative's certificated service area; and
    5. (5) if the competitive bidding process that includes the electric cooperative certificated area fails, the commission's delegated authority is extinguished, and such authority reverts to the electric cooperative.

Source Note:The provisions of this §25.43 adopted to be effective November 9, 2000, 25 TexReg 10899.