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Texas Court Rules PURA Allows TDU, REP to Share Brand, But Affirms Denial of Use of AEP Brand by REP
The Texas Third Court of Appeals, in a 2-1 decision, has affirmed a lower court's ruling and a Public Utility Commission of Texas decision which prohibited the sought use of the AEP brand by an Option 1 Texas retail electric provider, on the grounds that such use would be contrary to statutory prohibitions on utility "joint advertising or promotional activities" with a competitive affiliate.
Click here for background on the case, which was prompted by an application from AEP Texas Commercial & Industrial Retail Limited Partnership (d/b/a AEP Retail Energy) for an amended REP certificate to allow it to serve customers under 1 MW.
The Appeals Court found:
"The gravamen of the Commission's underlying fact findings is that the anticipated use of the shared AEP name, logo, and branding by AEP REP and the 'AEP Texas' TDUs would, in the eyes of retail consumers, promote all of these entities and their products collectively and effectively leverage each entity's advertising, brand identity, and goodwill to the benefit of the others. It is in this sense that the Commission concluded that the contemplated shared branding would be 'jointly' between and 'with' AEP REP and the 'AEP Texas' TDUs and 'favor' AEP REP and its products in the manner contemplated by [PURA] Section 39.157(d)(6) or [PUC Subst. R.] Rule 25.272(h)(2). All other things being equal, we cannot conclude the Commission's approach is unreasonable or inconsistent with the texts of Section 39.157(d)(6) or Rule 25.272(h)(2), especially in light of the overarching purposes of the Code of Conduct. A central legislative concern underlying the Code of Conduct's requirements and limitations, as we have previously explained, is preventing 'cross-subsidizations between regulated and competitive activities' -- i.e., the leveraging of a TDU's assets and monopoly position to aid an affiliate operating in a competitive market. Having found that the 'AEP' name and branding would have the practical effect of promoting both the 'AEP Texas' TDUs and AEP REP and leveraging each other's notoriety and goodwill to benefit the other, the Commission was not unreasonable in concluding that its use by AEP REP would effect the sort of subsidy from the 'AEP Texas' entities to AEP REP that the Code of Conduct seeks to prohibit."
However, while affirming the PUCT's decision, the Court also ruled that, to the extent the Commission interpreted PURA 39.157(d)(5)(B) as expiring in 2005, it erred in doing so.
PURA 39.157(d)(5)(B) required the PUCT to adopt rules to ensure that a utility does not, "allow a competitive affiliate, before September 1, 2005, to use the utility's corporate name, trademark, brand, or logo unless the competitive affiliate includes on employee business cards and in its advertisements of specific services to existing or potential residential or small commercial customers locating within the utility's certificated service area a disclaimer that states ..."
The Commission did not explicitly make any such finding regarding 39.157(d)(5)(B)'s "expiration," but did state in two conclusions of law that this section was "inapplicable" to the AEP Retail case and that "PURA does not address the shared use of business names after 2005."
The Appeals Court emphasized that only the specific disclaimer requirement of 39.157(d)(5)(B) expired in 2005, and that therefore this statutory provision otherwise remained in effect. Since 39.157(d)(5)(B) only explicitly addressed the use of a disclaimer, the Court's finding that it remains in effect is of import not so much for the language of 39.157(d)(5)(B) itself, but rather that its continued existence compels the reading of authority into PURA, external to 39.157(d)(5)(B), permitting the shared use of a logo or brand by a TDU and competitive affiliate.
Despite finding that PURA does allow the shared use of a logo or brand by a utility and competitive affiliate, the Court adopted an interpretation put forth by the Commission which found that AEP Retail's sought use of a shared brand was still impermissible. Under this adopted reasoning:
(1) Section 39.157(d)(5)(B) and Rule 25.252(h)(1) do not affirmatively authorize TDUs and competitive affiliates to share names, logos, or branding, but instead purport only to impose a temporary safeguard -- the disclaimer requirement -- on such sharing
(2) Whether the sharing of names, logos, or branding by a TDU and competitive affiliate is permissible in the first instance is governed by law external to Section 39.157(d)(5)(B) and Rule 25.252(h)(1)
(3) That external law determining the permissibility of sharing names, logos, or branding in the first instance includes Rule 25.107(e)(1)'s requirements that a REP's "business name" not be "otherwise contrary" to the Code of Conduct -- including not violating the prohibition against preferential joint advertising or promotion.
(4) Consequently, the sharing of names, logos, or branding by a TDU and competitive affiliate may potentially run afoul of the prohibition against preferential joint advertising or promotion, or any other Code of Conduct limitations for that matter. The existence of the disclaimer requirement of Section 39.157(d)(5)(B) and Rule 25.252(h)(1), at most, reflects merely that the external prohibitions and limitations cannot categorically bar all sharing of names, logos, or branding contemplated by Section 39.157(d)(5)(B) and Rule 25.252(h)(1), as such a construction would make the provisions nullities. In short, whether sharing of names, logos, or branding violates an external prohibition or limitation depends on the particular circumstances presented -- and those circumstances were found to exist here
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July 21, 2014
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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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