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RESA: Regulator, Without Notice, Adopts New License Renewal Application, New Broader Questions Exceed Regulator's Authority

May 15, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Connecticut PURA recently adopted a new application for the required five-year electric supplier license renewals, but the Retail Energy Supply Association said that the information sought by the new application exceeds the information PURA is authorized to require under the existing regulations.

According to RESA, "In March 2017, the Authority released the Review Application on its website to be used in connection with the five-year periodic review. However, the Review Application was released without any review or comment period and with no notice to electric suppliers licensed in Connecticut. To date, no notice that a new form has been posted or requesting comments has been issued been issued. The Review Application was briefly discussed at the April 2017 Supplier Working Group Meeting but only after a comment by one of the RESA members in attendance. As noted during that Supplier Working Group Meeting, and as elaborated herein, RESA is concerned with the Review Application in its current form."

RESA argued that the new renewal application requires applicants to submit, and have their application evaluated based on, information, "beyond that which the Authority is authorized by the Regulations to consider when reviewing an existing license," and therefore RESA said that the new application is an impermissible revision to the regulations

RESA said that the regulations currently require the following four items to be included in a periodic license review application along with an update to any information since the date on which the license was issued or last reviewed:

• The address of the applicant's headquarters, the articles of incorporation filed with the state or jurisdiction in which the applicant is incorporated, and any bylaws and amendments thereto.

• Information about the applicant's corporate structure, including names and financial statements, as appropriate, concerning corporate affiliates. If the applicant is a holding company or the subsidiary of a holding company, a graphical depiction of the organization shall also be provided.

• A summary of any history of bankruptcy, dissolution, merger or acquisition of the applicant in the two calendar years immediately preceding the application.

• If the applicant is a publicly owned company, a copy of the applicant's two most recent annual reports to stockholders, annual returns or summary financial statements, including filings made with the securities and exchange commission such as 10-K or 10-Q and 8-K filings and audited financial statements; if the applicant is a privately owned company, a copy of the company's two most recent federal income tax returns.

"Despite these limitations, the [new] Review Application contains twenty-five questions, several of which contain multiple subparts. However, some of these questions fail to appropriately capture or go beyond what is required by the Regulations to be included in a new and/or review application," RESA said

"The information requested in the Review Application exceeds what is required by the Regulations to be included and considered in connection with any license application (new or review). For instance, the Review Application asks whether the applicant generates revenue in other states. If yes, the applicant must provide the annual revenues generated in other states and the percentage of the applicant’s total annual revenues generated, or estimated to be generated, in Connecticut. However, the Regulations do not authorize the Authority to request this information as part of the license application process," RESA said

Similarly, RESA said that, "The Review Application also asks for the applicant’s sales in kilowatt hours for (a) each of the previous five years; (b) actual year-to-date; (c) projected to year end; (d) pro forma for the next two years; and (e) a breakdown of sales, in kilowatt hours, for subsection (a) and (b) for amounts applicable to each state. However, the Regulations do not authorize the Authority to request this information as part of the license application process. At most, the Regulations permit the Authority to request: (a) a twelve month estimate of the expected total electric generation load to be served in Connecticut by the applicant; and (b) if the applicant maintains less than $ 250,000 in security, a twelve month estimate of the applicant’s gross receipts from the sale of electric generation services in Connecticut."

"In addition, the Review Application asks if the applicant, its parents, subsidiaries or affiliates maintain an electric supplier license in other states. However, the Regulations do not authorize the Authority to request information about parent, subsidiary and/or affiliate licenses in other states. In fact, the Regulations only require that suppliers provide information 'regarding the status of the applicant’s operations in other states, including any decisions or orders granting or denying the applicant authority to sell electricity in another state,'" RESA said

"Additionally, the Review Application asks if 'the Applicant or any of its affiliates [has] ever been under investigation, fined, or cited for violations of the terms of an electric supplier license(s), any consumer protection law or regulation, or any state or federal law.' However, the Regulations do not authorize the Authority to request information about violations for which a supplier has merely been cited or under investigation. Nor should they since neither a citation nor an investigation in and of itself means there was an actually violation; rather, it is tantamount to an allegation. Moreover, the Regulations do not authorize the Authority to request information about violations of an electric supplier license or any state or federal law for which a supplier has been fined. In fact, any such request for information is overly broad and, depending on the nature of the violation, may have no bearing on a supplier’s ability to serve Connecticut customers. The Regulations only require that suppliers indicate 'whether the applicant or any of the applicant's corporate affiliates or officers have been fined, sanctioned or otherwise penalized either in this state or in another state or jurisdiction for violation of any consumer protection law or regulation.' Thus, consistent with the current Application and the Regulations, each supplier should only be required to indicate whether, since the date on which the license was issued or last reviewed, it has actually been 'fined, sanctioned or otherwise penalized . . . for violation of any consumer protection law or regulation,'" RESA said

"The Review Application also requires a description of the applicant’s records retention policy for consumer complaints, third party verifications, sales calls, and other customer records. However, the Regulations do not authorize the Authority to request this information as part of the license application process. Moreover, suppliers are not required to maintain all of these records. In fact, suppliers are only required to maintain: (a) customer complaints; (b) evidence of consent; (c) accident reports; (d) copies of residential customer notices and proof of mailing or delivery; and (e) a customer’s choice of notification method. Thus, this request should be removed from the Review Application or, at the least, modified to only require that suppliers describe their record retention policies for information they are actually required to retain," RESA said

"Furthermore, if the Company utilizes subcontractors/third party marketers to solicit Connecticut customers, it must provide certain information, including marketing training materials/scripts, a description of the third party marketer compensation process, and a description of how the applicant disciplines or terminates third party marketers that do not follow the applicant’s policies. However, the Regulations do not authorize the Authority to request this information as part of the license application process. In fact, RESA is not aware of a requirement that these materials be provided to the Authority on a routine basis. Thus, this request should be removed from the Review Application," RESA said

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