Texas Retail Electric Insider

Our Energy has entered into a settlement agreement with staff to conclude staff’s compliance audit.  As part of the agreement, Our Energy will pay an administrative penalty of $20,000.

During their open meeting today, the Commissioners approved revisions to the critical care form removing the requirement that customers provide a secondary contact. Commissioners instructed staff to open 25.483 and 25.497 to make necessary changes to corform the rules to this change.  REPs were advised not to seek to expand the scope of this narrow rule making.

The PUCT has issued a Notice of Violation (NOV) (Docket 40090)  against Glacial Energy seeking an administrative penalty of $235,750 as Oversight and Enforcement Staff alleged, among other things, that Glacial is not in compliance with the current requirements for REP ownership, alleged that Glacial provided false or misleading information to the Commission, and alleged that Glacial overbilled its customers.

The NOV is not a final decision, and Glacial has the right to request a contested case hearing on the alleged violations and the amount of the penalty.

Specifically, the NOV alleged that Glacial failed to comply with PURA §39.352, former P.U.C. SUBST. R. 25.107(g)(9)(A), 25.107(g)(9)(B), 25.107(j)(1) and current 25.107(g)(1)(D), related to Certification of Retail Electric Providers, and current P.U.C. SUBST. R. 25.474, 25.475, 25.479, 25.480 and 25.483, related to Customer Protection Rules for Retail Electric Service.

Notably, as explained further below, Staff alleged continuing non-compliance with the REP certification standards. As of publication time, no petition to revoke Glacial’s certificate has been filed due to this alleged violation.

Staff alleged that, “Glacial’s initial application for REP certification, filed on January 27, 2006, failed to disclose Gary Mole’s ownership interest and experience with Franklin Power Company (Franklin), (formerly Energy West Resources, Ltd, d/b/a Franklin Power Company). Glacial’s responses to requests for information indicate that Mr. Mole was a majority shareholder of Franklin.”

At the time of the Glacial application, Franklin had already experienced an involuntary mass transition, and was the subject of two complaints before the Commission brought by TDUs, who had sought revocation of the Franklin certificate for failure to satisfy financial obligations. Franklin Power’s REP certificate was eventually revoked.

“Failure to disclose Mr. Mole’s ownership interest and experience in Franklin was a material omission from Glacial’s 2006 REP application and tantamount to providing false and misleading information to the Commission,” Staff alleged. “Because Glacial failed to divulge Mr. Mole’s prior experience with Franklin, including the mass transition of its customers to POLR in 2005, the Commission’s decision to grant certification to Glacial was made on incomplete and inaccurate information,” Staff alleged.

“The fact that Franklin had experienced a mass transition of its customers to POLR in 2005 and had pending complaints before the Commission, which ultimately led to the revocation of Franklin’s REP certificate, are material events that would have likely resulted in the rejection of the Glacial REP application,” Staff alleged.

Effective May 21, 2010, new experience and ownership requirements, as well as financial requirements for the protection of customer deposits, went into effect for all REPs under P.U.C. SUBST. R. 25.107(g)(1)(D). Relevant here is that, “[a]n individual that was a principal of a REP that experienced a mass transition of the REP’s customers to POLR shall not be considered for purposes of satisfying this requirement, and shall not own more than 10% of a REP or directly or indirectly control a REP.”

Staff alleged that, to date, Glacial has failed to comply with and remain in compliance with the 10 percent ownership restriction for principals that have experienced a POLR event. Staff alleged that, to date, Gary Mole continues to be the majority shareholder of Glacial Energy Holdings, which owns Glacial Energy of Texas, Inc., a wholly-owned subsidiary of Glacial Energy Holdings, in violation of the 10 percent ownership cap.

Staff further alleged that Glacial has failed comply with P.U.C. SUBST. R. 25.475(g)(2) which requires REPs to disclose pricing information on their Electricity Facts Label (EFL). “Glacial’s EFLs do not show the price(s) that it charges its customers,” Staff alleged.

Additionally, Staff alleged that, “customers’ bills show that Glacial has overbilled its customers, contrary to P.U.C. SUBST. R. 25.480(d), by assessing sales tax on electricity associated with residential usage.”

Tax Code § 151.317 automatically exempts the residential use of electricity from state sales tax. Glacial has indicated that it has made refunds of the sales taxes erroneously assessed and collected on residential usage of electricity.

“The overbilling by Glacial has caused economic harm to its customers. And, the potential exists for additional economic harm given Mr. Mole’s previous involvement with a REP that experienced a POLR transition due to default on its prior financial obligations,” Staff alleged.

“Allowing principals who have been involved with a defunct REP, which experienced a mass transition of customers to POLR due to a failure to meet their financial obligations, to reenter and remain in the electric market places market participants and customers at risk for future disruptions in service due to mismanagement,” Staff argued.

“An administrative penalty is necessary in order to deter future violations and to set an example for other REPs applicants, especially since Glacial’s primary principal, Gary Mole, was a principal of a REP that experienced a mass transition of its customers to POLR due to a failure to meet its financial obligations,” Staff alleged.

The amount of the recommended administrative penalty was derived as follows:

• $119,000 (as of Jan. 5) for alleged violation of the 10% ownership cap

• $25,000 for the alleged overbilling

• $25,000 for the alleged failure to disclose in Glacial’s original application Mole’s experience at Franklin Power

• $25,000 for the alleged failure to disclose in Glacial’s original application the TDU complaints brought against Franklin Power

• $5,000 for the alleged failure to disclose pricing information on the EFL

• $36,750 for 34 alleged violations of the customer protection Substantive Rules found in a compliance audit. Such alleged violations include failure to include rescission information in the terms of service; failure for variable rate product bills to include a statement concerning how to obtain the price applicable for the next bill; failure to disclose variable rate price history; and failure to issue contract expiration notices for fixed products.

Staff alleges that the alleged violation of the 10% ownership limit has not been cured, and recommends a penalty rate of $200 per day for each day out of compliance, which through the January 5 date of a memo accompanying the NOV, is 595 days (from May 21, 2010) for the $119,000 listed above.

The Commission opened a rulemaking yesterday, likely to revisit the POLR rate/prepay price cap issue.  It has been assigned docket number 39969.  On a related note, Rep. Jim Pitts also filed a letter in docket 38829 calling on the PUCT to review this POLR rate mechanism for use with prepay rates.  His letter can be found at:  http://interchange.puc.state.tx.us/WebApp/Interchange/Documents/38229_152_712660.PDF

The current POLR rate is tied to MCPE which doesn’t exist anymore with the move to the Nodal market.  Further, as it presently stands, the PUCT staff has pushed prepay REPs to demonstrate compliance by pricing at or below the minimum POLR rate, as opposed to showing prices that might be above the minimum but below the maximum.

Finally, the POLR rate as presently constructed is a backwards looking rate, while prepay is clearly pricing on a going forward basis.  Hopefully, this rulemaking will clarify how those two realities can reconcile.

Gov. Rick Perry has appointed Rolando Pablos of Olmos Park and reappointed Ken Anderson Jr. of Dallas to the Public Utility Commission (PUC). The three-member PUC encourages competition and customer choice in Texas, and ensures electric and telephone operations, services and rates are fair and reasonable.

Pablos is an attorney in private practice and a senior advisor of SNR Denton. He is honorary consul to Spain, a member of the State Bar of Texas, chair of the San Antonio Free Trade Alliance, and a member and past board chair of the San Antonio Hispanic Chamber of Commerce. He is past chair of the Texas Racing Commission and City of San Antonio Small Business Advisory Committee, and a past board member of the Nueces River Authority and Greater San Antonio Chamber of Commerce. He is also a former adjunct professor at the University of Texas at San Antonio (UTSA), a past member of the UTSA College of Business Dean’s Advisory Council, and a graduate of Leadership San Antonio. Pablos received a bachelor’s degree from St. Mary’s University, a Master of Business Administration from the University of Texas at San Antonio, a master’s degree in hospitality management from the University of Houston, and a law degree from St. Mary’s University School of Law. He is appointed for a term to expire Sept. 1, 2013.

Anderson is a current commissioner of the Public Utility Commission, and is a former corporate and securities attorney in private practice. He is also past director of governmental appointments for Gov. Perry, and chief deputy director of governmental appointments for former Gov. Bill Clements. He is president of the Entergy Regional State Committee and a member of the State Bar of Texas Administrative and Public Law and Public Utility Law sections. He is also a past board member of the North Central Texas Health Facilities Development Corporation and Texas Securities Board, and a past member of the Texas Commission on Jail Standards. Anderson received a bachelor’s degree from Georgetown University and a law degree from Southern Methodist University. He is reappointed for a term to expire Sept. 1, 2017.

Chm. Nelson and Com. Anderson disagree as to whether utility fees should be disclosed on the PDS being considered in docket 39357.  They did agree that it is appropriate to have separate small commercial and residential PDS forms.  They also agreed that the form should have standardized language agreeing with the consumer arguments and rejecting the arguments of the REP group.  They will continue to think about the utility fees issue as this will be brought back to the next open meeting.

Just a reminder now that we are into July, that REPs must make available DPPs to customers expressing an inability to pay who meet the eligibility requirements.  See 25.480(j)(2)(a)(iii) for more information.

News in from the Governor’s Office:

http://governor.state.tx.us/news/appointment/16365/