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Texas ALJ's Proposed Decision Would Find Company's Activities Constituted Aggregation Without Certification By PUCT

ALJ Recommends One-Third of Penalty Sought By PUCT Staff

ALJ's Analysis Addresses What Activities Require Aggregator License

September 12, 2017

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

A proposal for decision from a Texas Administrative Law Judge would conclude that Current Utilities, Inc. engaged in activities as an electricity aggregator without first registering with the Public Utility Commission of Texas, and the proposed decision would impose a $5,000 administrative penalty on Current Utilities, Inc., which is one-third of the amount sought by PUCT Enforcement Staff.

The proposal for decision is not final and parties may file exceptions to the proposal for decision.

Although an ALJ had previously ruled in the case on the definition of "single purchasing unit", and what entities are required to register as aggregators with the PUCT (see story here), the ALJ at such time said that the record was not sufficient to determine whether Current Utilities' specific activities fell within the definition of aggregation, and ordered additional proceedings.

The ALJ's proposal for decision addresses this issue, and whether Current Utilities' specific activities fell within the definition of aggregator

"After considering all of the evidence and arguments of the parties, the ALJ recommends that the Commission find that Current violated applicable statutes and rules by acting as an aggregator without first being registered. For this conduct, the ALJ recommends an administrative penalty of $5,000," the ALJ recommends in the proposal for decision

"The ALJ finds that Current has acted as an aggregator, as that term is defined by PURA and the Commission's rules. The evidence establishes that Current entered into representation agreements with its clients through a power of attorney (POA). It then negotiated with REPs for the purchase of electricity on behalf of those clients. It negotiated a rate and terms and then offered the rate and terms to its clients uniformly on numerous different occasions. Staff's evidence and the admissions of Current's own principal establish this fact," the ALJ said in the proposal for decision

"Specifically, Staff's evidence establishes that, in June 2010, Tremcor Energy, Inc. (Tremcor) entered into an aggregation agreement that governed how Tremcor would bring customers to a particular REP. Thereafter, on March 22, 2011, Tremcor entered into an agreement with Current, whereby Current accepted assignment of the aggregation agreement. Then, on June 1, 2012, Current negotiated and signed a fixed rate contract renewal with the REP for 36 months for 491 clients. Basically, all 491 clients had identical electricity plans. Each client received the same electric retail rate for the same contract term and for the same contract period, with the rate varying only by the included electric delivery charge, depending on which transmission and distribution utility served the particular customer. Current acknowledges that it obtained electricity contracts for the 491 customers in issue, but contends that it did not negotiate for them as a group. Rather it contends that they just happened to come up for renewal on the same date and, thus, each received the same rate and terms when renewing. Current claims the REP approached it and offered the same rate plan for the 491 customers and Current notified the customers of the rate and gave each customer the opportunity to decline it. Current claims it was not negotiating on behalf of a group of customers, but was representing them individually and had just a single offer from the REP," the ALJ said in the proposal for decision

"The ALJ finds Current's assertion to be unpersuasive. The 491 customers had the same rate plan, rate term, and contract period. Current began representation of the customers under the assignment of an aggregation agreement from Tremcor. Current represented all of the customers and obtained an offer from the REP for all. In responding, Current did not attempt to negotiate any separate terms for individual clients, based on their unique circumstances, nor did it attempt to engage in any individualized negotiations for any individual clients. While Current was certainly allowed to negotiate in this manner, it was required to first register as an aggregator, because such efforts of negotiation meet the definition of aggregation services," the ALJ said in the proposal for decision

"'[A]ggregation' is defined as 'to join two or more electricity customers into a purchasing unit to negotiate the purchase of electricity by the electricity customer as part of a voluntary association of electricity customers.' By negotiating with a REP, using the leverage of having a group of customers for the REP, and negotiating the same rates, terms of service, and contract lengths for the group, Current was doing exactly what the Commission and legislature has recognized is the role of an aggregator," the ALJ said in the proposal for decision

The ALJ said in the proposal for decision that additional evidence of subsequent activities by Current Utilities, "clearly demonstrates that Current leverages its representation of numerous clients to negotiate with a REP a single rate favorable to similarly-situated clients, and then moves those clients in a bloc to the REP. Current engages in no individual negotiations for clients, but rather negotiates on behalf of the group a single rate, term, and contract. The mere fact that an individual client may later opt out of the agreement does not change the fact that Current is treating the group as a single purchasing unit when it negotiates a rate for the group with the REP. In fact, Current's July 2015 Agreement with the REP was entitled 'Aggregator Agreement,' clearly recognizing the nature of Current's representation of clients," the ALJ said in the proposal for decision

"Current contends that its customers are not in a single 'purchasing unit' because they sign separate contracts and are billed separately. While it is true that neither the statute nor the Commission's rules define a 'purchasing unit,' the ALJ concludes that the mere existence of separate contracts and separate billing do not nullify the existence of a purchasing unit. When Current negotiates a rate, it is doing so on behalf of the group of customers it is representing. The ALJ concludes that the negotiation of a single rate, term length, and other terms of service on behalf of the group makes the group of customers a single purchasing unit. By representing customers as a group, negotiating for them as a group, and obtaining the same rate and terms for the customers, Current acted as an aggregator," the ALJ said in the proposal for decision

"It is undisputed that Current has not registered with the Commission as an aggregator. Thus, by acting as an aggregator, Current violated PURA § 39.353(a) and 16 Texas Administrative Code § 25.111(d)(1) by providing aggregation services without first registering with the Commission as an aggregator," the ALJ said in the proposal for decision

"Staff seeks an administrative penalty of $15,000. Current's evidence indicates that its entire revenue for 2016 was less than $60,000. Thus, a penalty of $15,000 would represent at least 25% of its entire revenue for 2016. The ALJ concludes that such a penalty, although perhaps small for a larger entity, would be unduly harsh for a small entity like Current. Therefore, the ALJ recommends that Current be assessed an administrative penalty of $5,000 for its conduct," the ALJ said in the proposal for decision

Among the factors considered by the ALJ in recommending the $5,000 penalty were:

• "The failure to register as an aggregator is not an inconsequential violation, but it is also more administrative in nature. The Commission has not identified it as a Class A violation; thus it is not considered severe. It does not generally present a hazard to the health or safety of the public, and only marginally presents a risk to the economic welfare of the public, as Current’s customers all retained the ability to voluntarily accept or reject any electricity contracts negotiated by Current for them. Thus, the ALJ concludes that this factor mitigates against a higher penalty," the ALJ said

• "There has been no showing of economic harm to any customer or other person. Thus, the ALJ concludes that this factor mitigates against a higher penalty," the ALJ said

• "Although it continues to argue that it has not engaged in aggregation services, Current has indicated that it would ultimately comply with any final determination that it acted as an aggregator and would either register accordingly or stop doing business," the ALJ said

The proposal for decision would require that within 30 days from the date of a final order in the case, "Current shall either register as an aggregator in the State of Texas, or shall cease representation of customers in negotiation with REPs for the purchase of electric service."

Docket 45621

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