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Texas Judge Rules on Definition of Aggregator (Need For License)

October 25, 2016

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

In addressing motions for summary disposition in a case involving Current Utilities, Inc, a Texas ALJ has reached certain conclusions regarding the definition of an aggregator, which is required to be certificated by the Public Utility Commission, but found that the case lacks specific evidence to be resolved through summary disposition at this time

As previously reported (click here for details), PUC Staff had filed a Notice of Violation against Current Utilities, alleging that Current Utilities meets the definition of aggregator and operated as such without a certificate. Current Utilities argued that it does not combine customers into a "single purchasing unit", and only arranges for customers to purchase electricity as individual customers, and is therefore not an aggregator.

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, and both parties sought summary disposition

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 has 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

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, Current Utilities had said that, "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."

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

The ALJ addressed these arguments in ruling on the motions for summary disposition

"Contrary to Staff's assertions, the ALJ concludes that a single purchasing unit under the law will require that the represented members of the unit generally receive the same terms and benefits of any agreements reached on behalf of the unit. Thus, if Current is negotiating on behalf of its represented clients as single unit, then each of those clients will essentially receive the 'same deal' from the negotiations made on behalf of the unit, even if the clients have individual contracts and are not billed as [a] single unit. But, if Current is simply using its right to negotiate on behalf of a large number of clients as leverage to negotiate better individualized deals for each of those clients, then this would not likely be considered a single purchasing unit," the ALJ said

"[T]he ALJ disagrees with Staff that the mere negotiation on behalf of a large group of customers means that those customers are a single purchasing unit. On the other hand, the ALJ does not believe that a single bill or joint liability is necessary for the group of customers to be a single purchasing unit. They can still have individual contracts. The key determining factor is the extent to which those contracts reflect similar terms for the represented group of clients. This is a factual issue that must be addressed in more detail by the parties," the ALJ said

However, the ALJ noted that the evidence presented on summary disposition does not clarify this key fact in enough detail -- i.e., the degree to which the agreements reached for the clients are identical to each other, versus the degree to which they are different for each client.

"In order to decide this case, the ALJ concludes that this key fact must be addressed in detail," the ALJ said

The ALJ ordered the parties to supplement their motions with additional evidence, or, if parties feel there is adequate evidence to address the ALJ's question in the record, to brief the existence of such evidence in the record.

Docket 45621

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