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Texas Company To Pay $185,000 In Penalties And Refunds To Resolve Alleged Service As Retail Provider Without PUC Certificate

November 30, 2018

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

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The Connor Group, A Real Estate Investment Firm, LLC (The Connor Group) would pay an administrative penalty of $96,000 and issue refunds totaling almost $89,000 under a settlement with Staff of the Public Utility Commission of Texas to resolve allegations that The Connor Group was providing services as a retail electric provider without the requisite REP certificate, including alleged violations of Texas Utilities Code §§ 39.352, relating to the prohibition to provide retail electric services unless certified by the Commission

At issue is The Connor Group's billing of the common area electric charges to its tenants of its Texas apartment houses, consisting of 11 properties during such time, from August 2016 to July 2017.

Commission rules provide two methods under which an apartment house may bill its tenants for electricity without being subject to Commission rules regarding Retail Electric Providers (REPs): allocated billing, under 16 TAC § 25.141; and submetering, under 16 TAC § 25.142.

Commission Staff contends that an apartment house that implements any method to bill tenants for electricity outside of 16 TAC §§ 25.141 and 25.142 is subject to Commission rules concerning REPs.

Commission Staff contends that Commission rules do not allow an apartment house to bill tenants for common area electric charges other than for specific central systems utility costs in 16 TAC § 25.141 or through a Commission-approved REP certification or municipality certification.

According to the settlement, each dwelling unit of the eleven properties is individually metered for electric service. Tenants pay either a municipality, electric cooperative, or their selected REPs for the metered electricity consumed within each dwelling unit.

According to the settlement, in addition to the individually metered electric bill, paid to a municipality, electric cooperative, or REP, tenants during the relevant period also paid The Connor Group, through a third-party billing service, for actual electricity costs it incurred in common areas of its apartment houses. Specifically, The Connor Group allocated common area utility costs to its tenants based on the square footage of the living area of an individual tenant's dwelling unit as a percentage of the total square footage of the living area of all of the dwelling units in the individual apartment houses.

The settlement states that, "Commission Staff asserts that, by issuing bills to tenants for common area electric services, The Connor Group is a REP."

The settlement states that, "Neither The Connor Group, nor any of its properties, has received certification to operate as a REP from the Commission."

The settlement states that, "Commission Staff alleges that The Connor Group violated Texas Utilities Code § 39.352(a) and 16 TAC § 25.107(a)(1) when it purchased and resold electricity to its tenants without first having obtained a certificate from the Commission."

According to the settlement, Commission Staff alleged that The Connor Group billed tenants of its Texas apartment houses a total of $167,722.05 for the common area electric charges it incurred during the evaluation period.

According to the settlement, The Connor Group asserts that it did not realize any profit from the common area electric charges as those costs were allocated and passed through to tenants at the actual cost to the individual properties.

According to the settlement, Commission Staff asserts that, while The Connor Group did not charge customers more than the utility charged it, The Connor Group benefited by allocating to customers these costs.

The Connor Group ceased charging tenants for common area electric usage on April 1, 2018.

According to the settlement, "The Connor Group alleges that before it implemented the charges for common areas, in 2014, The Connor Group informally consulted with an individual in the Commission's Legal division to determine if its apartment houses could charge its tenants for common area electric usage. The Connor Group alleges that it was informed that such charges were not prohibited. The Connor Group also provided Commission Staff a letter from its attorney that states that he personally communicated with the Commission's Legal division in 2014 regarding the inquiry into the ability of The Connor Group to assess the charges."

According to the settlement, "Commission Staff alleges that The Connor Group did not provide conclusive evidence of anyone in the Commission's Legal division approving of a method to bill tenants for its common area electric charges. The Connor Group provided Commission staff with an email from The Connor Group to a staff member in the Commission's Legal division. This email described The Connor Group's intention to bill tenants for common areas and the staff member merely responded that she would call to discuss the matter."

According to the settlement, "The Connor Group has never received any official Commission approval of an alternative billing method, or any good cause exception, allowing it to bill tenants for common areas electric charges."

According to the settlement, "The Connor Group acknowledges that informal consultation with an individual in the Commission's Legal division does not bind the Commission in making a determination in this matter, but contends that it is a mitigating factor in this matter."

Under the settlement, The Connor Group has agreed to issue $88,794.25 in refunds to all affected current and former tenants of the six apartment houses it owned as of May 23, 2018. The Connor Group is not making refunds to tenants of apartment houses that it does not own as of May 23, 2018, because it no longer has access to the tenant information of those apartment houses.

Additionally, The Connor Group has agreed to pay an administrative penalty of $96,205.75.

Docket 48925

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