Joint Utilities Request Commission to Issue Deferred Accounting Order for Excess Liability Insurance Premiums

Strategic Insights -

The Public Utility Commission of Texas is facing a significant issue as the electric utility industry in the state is experiencing unprecedented increases in excess liability insurance premiums. The Joint Utilities, which include AEP Texas Inc., CenterPoint Energy Houston Electric, LLC, Entergy Texas, Inc., Southwestern Electric Power Company, Southwestern Public Service Company, and Texas-New Mexico Power Company, have filed an Amicus Curiae Response requesting the Commission to consider alternatives to address this issue through individual base rate cases. The Commission has the authority to issue a deferred accounting order, which would allow utilities to defer excess liability insurance premiums, and the Joint Utilities respectfully request that the Commission consider this option.

Key Takeaways:

  • The electric utility industry in Texas is facing unprecedented increases in excess liability insurance premiums, which is affecting the financial integrity of utilities.
  • The Joint Utilities have requested the Commission to consider issuing a deferred accounting order to allow utilities to defer excess liability insurance premiums.
  • The Commission has the authority to issue a deferred accounting order under Public Utility Regulatory Act (PURA) sections 14.001 and 14.151.
  • The Commission has previously exercised its authority to defer costs in similar circumstances, such as during the COVID-19 pandemic and when the Tax Cuts and Jobs Act was passed.
  • The Commission should follow its precedent and exercise its statutory authority to issue deferred accounting orders authorizing utilities to defer excess liability insurance premiums.
  • The Commission has the authority to issue either an individual or blanket deferred accounting order.
  • Many other electric utilities in several other states have already received authorization for deferred accounting for excess liability insurance premium increases.

Specifically, the Joint Utilities mention the following instances where the Commission has exercised its authority to defer costs:

  • In the context of bad debt expenses resulting from a retail electric provider's default on its obligation to pay delivery charges.
  • For Texas-New Mexico Company's request related to prefunding of the System Benefit Fund.
  • During the COVID-19 pandemic and when the Tax Cuts and Jobs Act was passed.
  • The Commission has also relied on its authority to issue blanket accounting orders where an unprecedented expense outside of the utility's control affected the utility industry broadly.

These instances demonstrate the Commission's ability to issue deferred accounting orders in similar circumstances and support the Joint Utilities' request for the Commission to consider this option.

Statistics:

  • The electric utility industry is experiencing unprecedented increases in excess liability insurance premiums, which is affecting the financial integrity of utilities.
  • The Joint Utilities have requested the Commission to consider issuing a deferred accounting order to allow utilities to defer excess liability insurance premiums.
  • Many other electric utilities in several other states have already received authorization for deferred accounting for excess liability insurance premium increases, as shown by the following statistics:

+ 2024 National Association of Regulatory Utility Commissioners (NARUC) resolution on Wildfire Impacts on Utility Customer Reliability and Affordability.

+ In the Matter of Southern California Edison Company (U338E) to Establish the Wildfire Expense Memorandum Account, Application No. 18-04-001, Decision No. 18-11-051 (Nov. 29, 2018).

+ In the Matter of Pacificorp, dba Pacific Power, Application for Authorization of Deferred Accounting Related to Insurance Costs, Docket No. UM 2301, Order No. 24-021 (Entered: Jan. 24, 2024).

+ In the Matter of Rocky Mountain Power's Application for a Deferred Accounting Order Related to Insurance Costs, Case No. PAC-E-23-18, Order No. 36045 (Served Dec. 29, 2023).

+ In the Matter of the Verified Application of Public Service Company of Colorado for Approval of Deferred Accounting Treatment for Costs Associated with Changes in Premiums for Excess Liability Insurance and Request for Expedited Treatment, Proceeding No. 24A-0380EG, Commission Decision Granting Application with Modifications (Issued Jan. 24, 2025).

+ In the Matter of the Petition of the Puget Sound Energy, Petitioner, For an Order Approving Deferral of Accounting Treatment of PSE's Wildfire Insurance Costs, Docket UE-231048, Order (Feb. 13, 2025).

Sources:

  • Amicus Curiae Response of Joint Utilities (Docket No. 57932)
  • Electric Utility Correspondence on Insurance Premiums, Project-No. 57774
  • State v. Pub. Util. Comm'n, 883 S.W.2d 190, 204 (Tex. 1994)
  • 16 Tex. Admin. Code § 25.107(j)(2)
  • PUC Rulemaking Relating to Certification of Retail Electric Providers, Project No. 35767, Order at 59 (Apr. 23, 2009)
  • Petition of Texas-New Mexico Power Company for Approval of Regulatory Asset Treatment of Expenses Related to System Benefit Fund Payments, Docket No. 26942, Order (Aug. 22, 2003)
  • In the Matter of the State of Disaster for the Coronavirus Disease 2019, Project No. 50664, Order Related to Accnual of Regulatory Assets at 1 GAar. 16, 10101 Proceeding to Investigate and Address the Effects of Tax Cuts and Jobs Act of 2017 on the Rates of Texas Investor-Owned Utility Companies, Project No. 41945, Amended Accounting Order at 1-2 (Feb. 15, 2018)
  • National Association of Regulatory Utility Commissioners (NARUC), Resolutions Passed by the NARUC Board of Directors at the November 10-13, 2024 NARUC Annual Meeting and Education Conference In Anaheim, California, Resolution of Wildfire Impacts on Utility Customer Reliability and Affordability, 4-6 (Nov. 2024)