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Texas PUC Staff, Current Utilities Seek Summary Judgment in Case Concerning Definition of Aggregator

Staff: Entity Joining Customers For Negotiations With REP Meets Aggregator Definition

Staff: "Broad" Definition of Aggregator Intended When Rules Adopted

August 31, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Staff of the Public Utility Commission of Texas and Current Utilities, Inc. have each filed a motion for summary decision in a contested Notice of Violation proceeding, in which Staff alleged Current Utilities has acted as an aggregator without a certificate, and Current Utilities argued that its business model does not meet the definition of an aggregator

Given that there are no factual disputes, both parties moved for summary decision. The dispute only involves a question of law regarding how to properly interpret the phrase, "single purchasing unit," as used in the definition of an aggregator

An aggregator is defined by PURA § 39.353(b) as, "a person joining two or more customers, other than municipalities and political subdivision corporations, into a single purchasing unit to negotiate the purchase of electricity from retail electric providers." 16 TAC § 25.111(c)(2) defines aggregator as an entity that, "conducts any activity that joins two or more customers into a purchasing unit to negotiate the purchase of electricity from retail electric providers (REPs)."

Staff moved for a partial summary judgment finding that Current Utilities, Inc. is an aggregator as defined by PURA § 39.353(b) and 16 TAC § 25.111(c)(2), and that Current Utilities has violated PURA § 39.353(a) and 16 TAC § 25.111(d)(1) by providing aggregation services without first registering with the Commission as an aggregator. Once these findings are made via summary judgment, the proceeding would address the amount of any civil penalty, Staff said

Current Utilities moved for summary judgment finding it is not an aggregator, asking that the case be dismissed and that it be awarded damages for litigation expenses as well as lost revenues from REPs who have withheld commission payments to Current Utilities based on Staff's allegations the company was not complying with the law.

Staff alleged that: "Current Utilities is an aggregator. It has a core group of customers that it has joined together into a single purchasing unit. Current Utilities contracts with each customer for three-year terms. The power of attorney obtained from its customers in this contract gives Current Utilities the ability to switch groups of its customers from REP to REP and enter into a contract on each customer's behalf."

"It is this ability to switch large groups of its customers at once to a REP that gives Current Utilities the leverage to negotiate with REPs for the purchase of electricity. Current Utilities and the REP negotiate the electric rates for the customer group, along with any special terms, such as no early termination fees. Once the two parties agree to the terns, Current Utilities switches all or a portion of its customer group to the new REP. As Current Utilities adds new customers, it enrolls them with the same REP under the terms Current Utilities negotiated with that REP," Staff alleged

"The power of attorney is the mechanism by which Current Utilities joins two or more customers into a single purchasing unit for the purpose of negotiating the purchase of electricity. By authorizing Current Utilities to switch a customer as many times as it chooses during the term of the contract, the power of attorney allows Current Utilities to leverage its customer base in the aggregate with REPs in negotiating the purchase of electricity. The power of attorney allows Current Utilities to move its customers in mass to a new REP. REPs are therefore willing to offer concessions to Current Utilities on behalf of its customers to entice Current Utilities to bring its group of customers to that REP," Staff alleged

Therefore, Staff alleged that, "Current Utilities joins two or more customers into a single purchasing unit with the purpose of using that group of customers to negotiate with REPs for the purchase of electricity."

Staff cited an email from Current Utilities to a REP which contained the following proposal, "I have 400 customers whose contracts are expiring in the next month and I am looking for a home for them."

"This email initiated a negotiation, between Current Utilities and the REP that culminated in this group of customers getting switched to this new REP pursuant to Current Utilities' power of attorney over these customer accounts. This undisputed evidence establishes that Current Utilities leverages its customer group in negotiations for the purchase of electricity on behalf of its customers," Staff alleged

"Additionally, it is important to reiterate that the power of attorney that Current Utilities obtains from all of its customers allows Current Utilities to treat its customers as a group for the purposes of negotiating with REPs ... The definition of aggregator does not require that the customers actually purchase the electricity as a group as Current Utilities has argued repeatedly. Instead, it only requires that customers are joined into a group for the purpose of negotiating the purchase of electricity from a REP," Staff alleged

"A closer examination of the promulgation of 16 TAC § 25.111 shows that the Commission deliberately defined the term aggregator broadly. 'PURA leaves much that is unspecified concerning the role of aggregators in the restructured market.' When adopting 16 TAC § 25.111, the Commission purposefully left 'as much to market forces as possible while upholding its charge to protect the public interest.' The Commission concluded 'that it is not appropriate to have a definition of 'aggregation services' that articulates a particular type of service, because such services will evolve in the restructured market.' This conclusion, explicitly laid out in the Preamble to 16 TAC § 25.111, is important for the resolution of this proceeding. It demonstrates a recognition by the Commission that it could not predict the precise forms that aggregation would take in the newly restructured electric market. Accordingly, the Commission did not delineate specific types of services that qualify as aggregation services; rather, it created a general framework for aggregation that would allow the free market the flexibility to develop a broad range of aggregation services that are beneficial for customers. We must have this understanding in mind when we examine Current Utilities' business practices," Staff alleged

In contrast, Current Utilities emphasized that the term "single purchasing unit" is not defined in PURA or by rule. Current Utilities also distinguished the process of negotiating versus the process of "purchasing," stating that Staff is attempting to conflate the two in defining its negotiation activities as meeting the "purchasing" standard under the definition of aggregator

Given the lack of a specific definition of "single purchasing unit" in the relevant law and rules, "it is mandatory under the laws of the United States that the interpretation of what an aggregator is be viewed from what the common man would conclude from reading the PUC definition and the common man interprets a 'single purchasing unit' to be one unit purchasing as a single entity and therefore that there would be one single 'customer' to the REP while there would be numerous customers to the Aggregator, and not that each customer is under their own unique contract with the REP as is the case with our customers. From reading all the debate regarding aggregators, it would appear that those creating the rules had a similar understanding as well," Current Utilities said

"Any reasonable person would ascertain that 'Joined together into a single purchasing unit' would require that the group of people are NOT purchasing electricity as individuals, but as one single entity, which would entail ONE billing statement which would somehow be divided up amongst the participants who have agreed to be a single entity. Defendant does not do this," Current Utilities said

"The PUC has claimed that because Current Utilities negotiates on behalf of a group of customers with REPs that therefore Current Utilities is aggregating. Thus the PUC attempts to change the definition of 'single purchasing unit' into that of 'single negotiating unit'. Nowhere in the PUC rules does it state that an individual or company NEGOTIATING on behalf of two or more customers must register as an aggregator. Purchasing and negotiating are two distinct activities and if the PUC intended that negotiating as a group would constitute aggregation, then the public would have the right to have the law clearly state as much, yet the rule states 'purchasing' and not 'negotiating,'" Current Utilities said

More succinctly, Current Utilities interprets the phrase "single purchasing unit" as a block of customers jointly and severally liable for the electric usage of the group

"An 'aggregator' then is surely not either someone acting on behalf of a customer to find him the best possible deal or acting on behalf of a REP to find them customers. In essence, an aggregator ought to be something more than that. But PURA does not establish that and instead dances around the question of what an aggregator is. But reading through the Project number 21082 comments and questions, the commission tries to find an answer for itself, but clearly fails. In the end, we are left with a jumbled set of facts that in effect, do not really establish what an aggregator is except for the fact that an aggregator joins together two or more customers into a single purchasing unit while not adequately describing what a single purchasing unit is nor how exactly an aggregator can go about doing so in a way where the customer can pay for those services," Current Utilities said

Current Utilities cited numerous aggregator annual reports, many from 2004, in which certificated aggregators state they have no aggregation activities, as supporting its view that mere negotiation of purchases does not constitute aggregation.

Staff argued that Current Utilities' limiting definition of aggregation -- a block of customers with a single bill from the REP -- is not supported, because, among other reasons, the preamble in adopting 16 TAC § 25.111 is clear that aggregator, "cannot directly accept payments or prepayments for electric service."

Docket 45621

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