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The Public Utilities Commission of Texas (“PUCT”) approved a settlement agreement October 31, 2001, which will delay the start of retail competition in Texas’ Southeastern region. The Settlement Agreement (the “Agreement”) was among Entergy Gulf States, Inc. (“EGSI”), the Staff of the Commission, Texas Industrial Energy Consumers, CLECO Marketing & Trading LLC, and certain other parties who may chose to sign the agreement. Under the terms of the Agreement, the start date for retail open access in EGSI’s Texas territory is delayed from January 1, 2002 until September 15, 2002. The Texas Public Utility Regulatory Act directs the PUCT to delay the onset of retail open access if the PUCT determines that the power region is unable to offer fair competition and reliable service to its customers on January 1, 2002. The PUCT Staff petitioned the PUCT to open a docket and consider a delay of retail open access because, as opposed to other service regions in the state, there had been no customer participation in the retail competition pilot project in the Southeastern region. Further, Staff asserted that fair competition and reliable service are hindered because the Federal Energy Regulatory Commission (“FERC”) has not yet approved a regional transmission organization (“RTO”) for the Southeastern region. The Staff’s petition also requested a delay in the required capacity auction, which, by statute, was to take place at least 60 days prior to the competition date. In the absence of established competitive forces, the Staff contends that bid prices for capacity would probably be quite low and affects EGSI’s “price-to-beat”. (“Price-to-beat” is the rate available to residential and small commercial customers of a retail electric provider’s affiliated transmission and distribution utility calculated as 6% less than an affiliated electric utility’s corresponding average bundled residential and small commercial rate effective on January 1, 1999, adjusted by a fuel factor.) Further, Staff questioned EGSI’s ability to serve its native load if part of its capacity were auctioned-off. Under the terms of the Agreement, capacity auctions will be delayed until at least 60 days before retail open access begins. EGSI’s current pilot project will continue as is until September 15, 2002. Current rates, as well as previously determined discount rates, are frozen until retail open access is achieved. The signatories agree not to file for a change of rates during the freeze period. The parties also agree that the current price-to-beat fuel factor and base rate tariff cases should continue before the PUCT as planned. The Agreement states that energy efficiency and renewable energy programs should move forward according to applicable statutes. EGSI will include the expenses incurred in implementing the energy efficiency and renewable energy programs into its annual report. The Agreement establishes procedures for incorporating a FERC-approved, functional RTO in the process of achieving retail open access. The procedures include: “(1) a market protocols project for the purpose of developing in a noncontested project the protocols to support retail open access in EGSI’s Texas service industry; (2) a contest proceeding to consider the application for certification by the PUCT of Entergy’s Qualified Power Region (QPR); and (3) a contested docket to determine whether the market systems and institutions in EGSI’s Texas service territory are ready for retail open access.” Under the Agreement, a market protocols project will commence at the PUCT upon the PUCT’s approval of the Agreement. The market protocols project will be a non-contested case and will provide interested parties an opportunity to participate in workshops and submit written comments evaluating the Open Access Transmission Tariff and protocols. Market participants will have a period of 4 months to negotiate competitive contracts. Retail open access will begin under price caps during this period. This 4-month period will begin at the later of either the PUCT’s final order certifying the QPR or a PUCT order determining that the EGSI service area is ready for retail open access. The Agreement requires EGSI to continue to seek approvals for business separation, but separation will not occur until the day before retail open access. As part of Texas’s electric deregulation legislation, utilities are required to unbundled their business activities by separating into three different types of companies: power generation, retail electric provider, and a transmission and distribution utility. Before and after this business separation, EGSI’s obligation to purchase qualifying facilities energy will be governed by applicable law.
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