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Shock: Texas City Asserts Jurisdiction Over Retail Provider, Orders $250,000 Refund

December 31, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The City of McAllen, Texas has asserted jurisdiction over a retail electric provider, hearing a customer complaint concerning an early termination fee and ordering AP Gas and Electric to refund the fee to a customer.

APG&E filed a petition with the Public Utility Commission of Texas seeking the issuance of a declaratory or other order stating that the Mayor of the City of McAllen, acting on the City's behalf, exceeded the City's jurisdiction when hearing and ruling on the complaint case brought to it by LFD, LLC d/b/a LFD Homefurnishings (LFD) against APG&E.

The PUC's Customer Protection Division previously found that APG&E's application of a $250,000 early termination fee was consistent with the customer's contract. After such determination, LFD did not file a formal complaint with the PUC, but rather filed the same complaint with the City of McAllen, with the City ordering a refund of the fee

APG&E argued that 16 TEX. ADMIN. CODE § 22.242 grants the City of McAllen with original jurisdiction over an, "electric utility providing service."

"APG&E is a REP as defined by 16 TEX. ADMIN. CODE § 25.5(115). Because APG&E is a REP it cannot also be defined as an electric utility because 16 TEX. ADMIN. CODE § 25.5(41) explicitly excludes a REP from the definition of an electric utility," APG&E said

"Though municipalities can regulate electric utilities within their jurisdiction, they have no regulatory jurisdiction over REPs, such as APG&E, and are limited to the extent that they may only require a REP to register with the municipality if they conduct business there," APG&E said

"The Commission [PUC] has ruled that this limited municipal registration authority does not confer broader regulatory authority on municipalities over REPs, such as APG&E," APG&E said, citing Appeal of TXU Energy Services Company of City of Coppell Ordinance No. 2011-967, Docket No. 24906, Preliminary Order at 5 (Feb. 28, 2002).

"In addition, the Commission has expressly stated '[t]he legislature could not have been clearer that rules or ordinances cannot regulate competitive electric services or competitors and cannot restrict or condition competition unless expressly authorized in PURA,'" APG&E said

"APG&E continues to assert that the correct forum for the underlying complaint would have been the PUC and not the City of McAllen as the City of McAllen has no jurisdiction over the underlying issues, and therefore convened a hearing in violation of PURA," APG&E said

"When a City attempts to regulate a REP in this manner it invalidates the Commission's exclusive regulatory authority over REPs, and thwarts its ability to establish and implement consistent customer protection standards. If the Commission fails to act in this instance, the potential exists that every city in restructured areas will adjudicate customer complaints and effectively establish an extra-statutory regulatory scheme for retail electric service resulting in REPs being subjected to a patchwork of different, and potentially conflicting, local regulatory standards. By allowing a city to regulate the actions of a REP, a REP will be forced to adjudicate customer complaints not only at the Commission but in hundreds of Texas cities and towns in venues that may adopt conflicting standards among themselves, and standards that may be at odds with the Commission's statutory interpretation. Allowing customer complaints against REPs to be heard by cities, a subpart of a city, or city officials threatens needed regulatory consistency and therefore represents a potentially grave threat to the vitality and competitiveness of the Texas retail market and is contrary to the state's carefully established regulatory scheme, established in 1999 by Senate Bill 7," APG&E said

Docket 45486

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