What happens if your Retail Electricity Provider (REP) were to suddenly go out of business? In Texas, thanks to the Provider of Last Resort (POLR), your lights will stay on. But, your bill will go up dramatically!
In this article, you’ll learn about the POLR, and why you should immediately shop for electricity if the POLR becomes your provider.
What is a Provider of Last Resort (POLR)?
In Texas, the Provider of Last Resort (POLR) becomes your electricity provider if your current Retail Electric Provider (REP) exits the market for any reason. The POLR is basically a safety net if your REP were to go out of business. This electricity service is intended to be temporary so that you do not experience an interruption in service.
The PUCT designates Providers of Last Resort as back-up electric service providers in each area of Texas open to competition. POLR service is relatively high-priced, due to the unknowns. It’s an uncertain number of customers with uncertain electricity loads.
What Happens if My REP Goes Out of Business? Will My Lights Go Off?
Retail energy is a high risk commodity business. REPs must procure power wisely, and ensure that they have enough power for their customers needs. If they don’t have sufficient cash reserves or collateral, they may have to go out of business.
If an REP has not purchased enough electricity to serve their customers, they are forced to purchase real-time electricity to meet their customer’s needs. And if the Electricity Reliability Council of Texas (ERCOT) views the day-ahead market prices as risky, they may demand more collateral from your retailer.
Not hedging properly, and not having enough credit and capital are both costly mistakes. Texas electricity companies (REPs) will likely go out of business due to the February 2021 winter storm. (You can read more about what happened to the Texas electricity markets in February 2021 here.)
If you’re very lucky, your current REP will enter into an agreement with a secondary provider and will sell your account to another provider. The name on your bill will change, but your contract rate would be honored.
However, if your REP goes out of business you will be served by the POLR on a market rate that is a very high electricity price.
If you are “dropped to the POLR” or the POLR becomes your provider, you should immediately shop for a new fixed rate Texas electricity plan.
Once you are dropped to the POLR, you will have 60 days to shop for a new provider. But you should shop immediately to avoid paying high POLR rates. If you do not switch away from the POLR within the first 15 days of service, the POLR provider may also require you to pay a deposit to keep your lights on!
Who is my Provider of Last Resort?
The Texas POLR list is subject to change every two years and is set by the PUCT. The largest providers in each delivery area are required to serve as a POLR. Smaller providers may volunteer to participate, to share in the burden.
Current POLR providers are listed below, by delivery area:
- Oncor: TXU Energy
- Centerpoint: Reliant Energy
- TNMP: TXU Energy
- AEP: TXU Energy
You can find the current POLR Rates online. If you are dropped to a POLR provider due REPs that go out of business in February 2021, you should shop immediately for a fixed rate electricity plan. That’s because POLR rates reflect market pricing. Your March 2021 POLR rate would be very expensive.
What do I do if I get “dropped to the POLR” rate?
When REPs go out of business, their customers are automatically switched to the Provider of Last Resort in their area.
You’ll get a notice from the PUCT that your REP is going out of business and that you’re scheduled to be moved to your POLR. You might get this notice via mail, email or telephone call.
Once you receive notification that you’ve been dropped to POLR, you have 60 days to choose a new retail electric provider.
If this happens to you, be alert… and immediately shop for a new retail electricity provider. Because the bad news is, you’ll be served on the POLR market price. And that rate is very high!
Compare Electricity Rates by Zip Code
How are POLR Rates Calculated?
POLR rates are calculated based on the cost of electricity on the open market, called the Real Time Settlement Point Price. These prices are significantly higher than regular fixed prices.
And, when REPs are going out of business? It’s because the cost of electricity on the open market are very high! That means your rate will be very high if your REP goes out of business and you are dropped to the POLR for your area.
If you find out you are being moved to the POLR, immediately start shopping around for a new electricity provider.
If you don’t switch away, your POLR may contact you within 15 days to required that you pay a deposit to keep your service.