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Texas OPC Says TXU Credit Scoring Puts Poor at Risk

The Texas Office of Public Utility Counsel (OPC) has filed a complaint against TXU Energy regarding the company’s use of credit scores in the pricing and marketing of residential electric service in its out-of-territory service area.

According to the OPC complaint, "The use of credit scores as a proxy for income levels, race, national origin, marital status, or other prohibited factors places the most vulnerable population groups at risk for electricity service, such as the elderly and the poor, when those scores are used to deny service or to discriminate in the price of the service."

TXU Energy, the largest retail electric provider in the state, provides a "Price to Beat" (lowest price) electric service rate to residential customers as the incumbent supplier in its own North Texas service area.   In other areas of the state, TXU Energy competes with other incumbent suppliers by offering rates lower than the incumbent providers’ Price to Beat.  TXU Energy recently stated that it had started a program which uses individual’s credit scores to determine the rate TXU would charge its residential customers outside its service territory.

Predicting that over 200,000 residential electric customers may be affected statewide by  credit scoring, the OPC said current TXU Energy residential customers with relatively lower credit scores will receive price increases based on the application of credit scoring. According to OPC, TXU Energy would no longer offer electric service to new customers with the lowest credit scores or for new customers with no credit history.

The complaint requests that the Texas Public Utility Commission take immediate action to enforce state and federal customer protection safeguards and prohibit TXU energy from implementing its credit score pricing and marketing plan in its competitive service areas.

OPC also cited a recent study by the Missouri Department of Insurance, which found that credit scores are "significantly correlated with minority status and income as well as a host of other socio-economic characteristics, the most prominent of which are age, marital status, and educational attainment." The report concluded that credit scoring produces significantly worse scores for residents of high minority zip codes and residents of low-income zip codes.  Notably, the relationship between minority concentration in a zip code and credit scores remained even after the study eliminated other variables such as income, educational attainment, marital status, and employment.  The report found, "that minority concentration proved to be the single most reliable predictor of credit scores"  and that "race/ethnicity proved to be the most robust single predictor of credit scores."

For copies of the OPC’s complete filing, call 512-936-7500.

Source:  Texas OPC