Texas Broker Cites Legislative Intent Of SB 1497 In Comments To Texas PUC Opposing Strawman Proposal For Required Disclosure Of Compensation To Brokers

In Legislative Intent, Bill's Sponsor Said PUC's Broker Regulation Is, "Extraordinarily Limited"; Intent Is, "Not Have Any Of Their Secret Sauce ... Become Public"

Strawman's Compensation Requirement Called, "Egregious Overreach"

September 30, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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Verdigris Energy LLC filed comments with the Texas PUC urging the PUC, "to consider and comply with the intent of the enabling legislation," as the PUC considers the regulation of electric brokers

Verdigris included in its comments a Statement Of Legislative Intent read into the House record during second reading of the bill

The statement of legislative intent had been first reported by EnergyChoiceMatters.com in May (story here)

As copied by Verdigris in its comments, the Statement Of Legislative Intent was as follows, from the bill's sponsor, Rep. Tan Parker, during questioning from another member (emphasis by Verdigris has been omitted):

Wednesday, May 15, 2019 HOUSE JOURNAL — 66th Day 3781

CSSB 1497 ON SECOND READING (Parker - House Sponsor)

CSSB 1497, A bill to be entitled An Act relating to the registration and regulation of brokers by the Public Utility Commission of Texas.

CSSB 1497 - STATEMENT OF LEGISLATIVE INTENT

REPRESENTATIVE MURPHY: As we create this new registration at the PUC, I want to establish some legislative intent to make sure we prevent any unintended consequences and focus on the limited purpose that you’re bringing it for us. Do you agree this registration should be limited in its purpose?

REPRESENTATIVE PARKER: Absolutely, it needs to be limited in its purpose. We want them to be very strict in terms of just making certain that they’re only talking about contact information, the most basic information about the entity. We want them to be able to use their authority very sparingly. I want this to be extraordinarily limited.

MURPHY: And so the information you’re asking them to provide is really contact information and then the type of business entity under which they operate.

PARKER: That is absolutely correct––just very simple information so that we can protect all the wonderful brokers that are out there that are keeping our electric, if you will, system and economy healthy, if you will, here in Texas.

MURPHY: Representative Parker, I know you’ve worked hard on this, and you recognize it’s mostly good actors, but there are some that are not, perhaps, good actors. And this will help identify that?

PARKER: That’s correct.

MURPHY: But importantly, this does not authorize any fee or new fees at the PUC, and it’s not your intention to create that kind of structure.

PARKER: Representative Murphy, 100 percent. There is no fee at all associated with this. That needs to always be the way it is going forward. I intend to personally shepherd this process and make certain the PUC keeps it very simple to just filling out a basic form with the most basic of information. Again, we want brokers that are doing a wonderful job for Texas to continue to do so and to not have any of their secret sauce, so to speak, with regard to how they operate their business to become public.

"Let us consider elements of the Staff Strawman Rules in light of this clear guidance from the sponsor of the enabling legislation," Verdigris said

Verdigris cited the strawman's proposed §25.486 (d) (5), which requires disclosure of "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."

"This is an egregious overreach far beyond the legislative intent," Verdigris said

"Brokers are paid by suppliers who include the broker’s commission in the ultimate contract price. As it stands today, neither the supplier’s commodity margin nor the broker’s commission is disclosed as separate items, but rather, they are embedded in the ultimate contract price, which is what matters to the Client. Such an arrangement does not require a contract be written between Broker and Client. The Broker’s job is to deliver a contract the Client chooses to sign and the Client retains the right to decline. This arrangement also enables the client to retain or fire the broker entirely at their discretion. This is incredibly beneficial to Clients as they can avoid the cost and burden of yet another contract negotiation and review process, which is one of the most difficult aspects and burdens of a competitive energy market," Verdigris said

Among other concerns with various provisions, Verdigris also opposed the strawman's proposal that brokers be prohibited from, "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."

"Verdigris Energy has direct experience persuading REPs to take actions in favor of Clients. Our relationships with REP personnel from bottom to top and our ability to argue, negotiate, cajole and persuade REP decision makers has repeatedly made a difference for our clients. We have been able to have fees waved, contract sections modified in our client’s favor, and even had new supplier products created for our customers. We have access to information maintained by QSEs and REPs but not typically provided to the general public, such as ERCOT transactions, daily forward curves for wholesale power in ERCOT and 4CP alerts. These are but a few of the ways a good Broker can provide a Client better quality service from a REP. Additionally, by working day-in and day-out with numerous REPs, brokers have a unique vantage unavailable to either Clients or REPs themselves. Thus when a REP does something objectionable or fails to do something favorable for a client, an effective Broker can help the REP identify their competitive shortcomings in the market, and in so doing sometimes cause a REP to accommodate a customer because of the actions taken by the Broker. All of these things work together for the good of a good Broker’s clients," Verdigris said

Docket 49794

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