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.