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Strawman Proposed Rule From Texas PUC Staff Would Require Brokers To Inform Customers Of How Broker Will Be Compensated, Amount Of Compensation (By REP Or Customer)

Strawman Would Require Brokers To Provide To Customers The Names Of Any REPs For Which The Broker Has An Agreement To Recommend Such REP To Clients

Strawman Would Require That Agreement Allowing Broker To Act As Customer's Agent Must Be, "In Writing"

Strawman Would Prohibit Brokers From Stating Or Leading A Customer To Believe That Receiving Brokerage Services Will Provide A Customer With Better Quality Service From A REP

Strawman Would Limit Broker Registration Term To Three Years, Require Renewals

September 18, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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Staff of the Public Utility Commission of Texas have filed a strawman proposed rule to regulate electricity brokers, including establishing and amending customer protection rules and establishing registration requirements (the current registration process is an interim process).

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Among other things, the strawman would create new 16 TAC § 25.486, Customer Protections for Brokerage Services, which would apply to all brokers, as well as to (where specifically stated) retail electric providers (REPs).

Under § 25.486, "agent" would be defined as, "a broker who has the legal right and authority to act on behalf of a client regarding the selection of, or enrollment with, a REP for a product or service offered by a REP, including electricity service."

Under § 25.486, "client" would be defined as, "a retail electric customer or applicant who receives or solicits brokerage services from a broker."

The strawman § 25.486 would require that all brokers must inform clients of the following, among other things, prior to the initiation of brokerage services

• "How the broker will be compensated for providing brokerage services, who will provide the compensation, and the amount or method of calculation of the compensation"

• "The names and commission certificate numbers for any REPs with which the broker has an agreement to recommend that REP to clients"

• "Whether there is a financial penalty for terminating the brokerage services agreement, and if there is, the amount of the penalty"

The strawman § 25.486 would provide that, "An agreement between a broker and a client that authorizes the broker to act as the client's agent must be in writing."

Among other things, a broker that enters into an agreement with a client to act as the client's agent would be required to inform the client of the following:

• A clear description of the actions the broker is authorized to take on the client's behalf

• The duration of the agency relationship

• How the client's customer data and account access information will be retained by the broker and disposed of at the conclusion of the agency relationship

The strawman § 25.486 would include a section governing "Customer Enrollments by Brokers" which would provide as follows:

(1) A REP is permitted to enter an agreement with a broker to complete enrollment of a retail electric customer or applicant on behalf of the REP.

(2) A REP that authorizes a broker to complete retail electric customer or applicant enrollments is responsible for compliance with applicable laws and commission rules for all activities conducted on the REP's behalf by a broker.

(3) A broker that is authorized by a REP to complete online customer or applicant enrollments must prominently display the EFL for any products offered without a person having to enter any personal information other than zip code and information that allows determination of the type of offer the consumer wishes to review. Person-specific information must not be required. The EFL for each product must be printable in no more than a two page format. The EFL, TOS, and YRAC for any products offered for enrollment on the website must be available for viewing or downloading.

The strawman § 25.486 would require that, "All written, electronic, and oral communications, including advertising, websites, direct marketing materials, and billing statements produced by a broker must be clear and not misleading, fraudulent, unfair, deceptive, or anti-competitive."

The strawman § 25.486 would provide that prohibited communications from brokers would include, but would not be limited to, among other things, "Stating, suggesting, implying or otherwise leading a client to believe that receiving brokerage services will provide a customer with better quality service from a REP or TDU."

The strawman § 25.486 would provide that all printed advertisements, electronic advertising over the Internet, and websites must include the broker's registered name or commission authorized business name and the broker's registration number.

More generally, the strawman would provide that, "A broker must comply with the commission's education, disclosure, and marketing guidelines and rules. A broker may not release proprietary customer information to any person unless the customer authorizes the release in a manner approved by the commission."

The strawman would amend §25.5 (General Provisions - Definitions for the electric substantive rules) to define broker as, "A person that provides brokerage services."

The strawman would define "Brokerage Services" as, "providing advice or procurement services to, or acting on behalf of, a retail electric customer regarding the selection of a retail electric provider, or a product or service offered by a retail electric provider, including brokerage services offered online. Enrolling a retail electric customer as an agent for a retail electric provider is not a brokerage service."

The definition generally tracks that of S.B. No. 1497, with the addition of the explicit language that enrolling a retail electric customer as an agent for a retail electric provider is not a brokerage service

The strawman would amend current §25.471, General Provisions of Customer Protection Rules, to provide that §25.471 applies to brokers

The strawman would update various provisions of §§ 25.472, 25.473, 25.474, 25.475, 25.482, 25.485, 25.491, and 25.492 to make them applicable to brokers, generally making any provision currently applicable to an aggregator also applicable to a broker

In one notable change, the strawman would provide that each broker, "must employ 24-hour capability for accepting a customer's or client's rescission of the terms of service by telephone, according to rights of cancellation in §25.474(j) of this title (relating to Selection of Retail Electric Provider)."

The strawman would also add new 16 TAC § 25.112 governing broker registrations

Most notably, the strawman 16 TAC § 25.112 would provide that a broker registration expires three years after the date of acceptance. Each registrant must renew its registration with the commission not less than 90 days prior to the expiration date of the current registration by submitting the required form in the manner established by the commission. A registration that is not timely renewed is no longer valid and the entity will be removed from the broker list on the commission's website.

Brokers would be limited to operating under a maximum of five assumed names. At the time of registration, the registering entity must provide all names to the commission.

"Business names must not be deceptive, misleading, inappropriate, confusing, or duplicative in whole or part of any name currently in use or previously approved for use by a broker, aggregator, or REP in a way that may be confusing or misleading," the strawman would provide

As part of the registration, the broker would be required to file, "Information on file with the offices of the county clerks in the counties where the registering entity maintains a business premise and in all counties where the registering entity conducts business under an assumed name."

In registering with the PUC, the broker would be required to provide, "The name, title, business mailing address, and telephone number of each of the registering entity's directors, officers, or partners."

The strawman would provide that during the broker registration process, the registering entity must immediately inform the commission of any material change in the information provided in the registration application while the application is pending.

"A broker must amend its registration to reflect any changes to the information previously submitted, including business name, address, or telephone number within ten business days from the date of the change," the strawman would provide

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