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In Draft Broker Rule Proposal For Adoption, Texas PUC Staff Would Require Electric Brokers To Disclose How Broker Will Be Compensated, But Not Amount Of Compensation

Brokers Would Be Required To Disclose To Customers Affiliation With Any Retail Electric Provider

Brokers Would Be Required To Obtain Agreement "In Writing" To Act As "Client Agent"

Broker Registration Limited To Three Years, But Update Process Tweaked

April 24, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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Update, April 27:

Since's original publication of the story below on the afternoon of Friday, April 24, Texas PUC Staff have additionally filed a redline of the recommended proposal for adoption.

EnergyChoiceMatters notes that the redline as available on the PUCT's online filings interchange does not include the proposed requirement that a broker must disclose to the customer, prior to the initiation of service, "The registered name of any REP that is an affiliate of the broker."

This proposed requirement is reflected in the "clean" version of the Staff proposed rule as well as the draft preamble (as reported in our story Friday), and it appears that the omission in the redline is an oversight

Earlier, April 24:

Staff of the Texas PUC on April 24 filed a draft proposal for adoption to implement rules regarding the registration of electric brokers.

Under the draft proposal for adoption, brokers would be required to provide to a client, prior to the initiation of brokerage services, "[a] description of how the broker will be compensated for providing brokerage services and by whom."

The specific amount of the compensation would not need to be disclosed by the broker

In a draft preamble, Staff states, "The commission declines to adopt the recommendation of Brasovan that brokers be required to disclose the amount of compensation that they receive from REPs."

Additionally, under the draft proposal for adoption, brokers would be required to disclose prior to the initiation of service, "[t]he registered name of any REP [retail electric provider] that is an affiliate of the broker."

The draft proposal for adoption defines "client agent" as, "A broker who has the legal right and authority to act on behalf of a client regarding the selection of, enrollment for, or contract execution of a product or service offered by a retail electric provider (REP), including electric service."

The draft provides that, "An agreement between a broker and a client that authorizes the broker to act as a client agent for the client must be in writing."

The draft proposal for adoption would reject a proposal from TEAM to include language that a REP is only required to accept a broker’s representation of agency authority if the broker has a statutorily recognized durable power of attorney.

"The commission declines to include language governing under what circumstances a REP must accept a broker’s representation that it has agency authority to act on a client’s behalf or that requires a REP to accept an enrollment submitted by a client agent. The commission agrees with EMEX/Patriot that these issues should be resolved commercially and through agency law. The commission does not intend to alter or adjudicate any claims of agency authority that may exist under areas of law that are not within the commission’s jurisdiction," the draft preamble states

"With regard to Energy Ogre’s arguments about the tactics that REPs use to prevent the enrollment of applicants that are represented by client agents, the commission agrees with ARM and TEAM that a fundamental principle of competitive markets is that buyers and sellers come together willingly. As long as it abides by the discrimination prohibitions of PURA and 16 TAC §25.471(c), and any other applicable laws, a REP is not prohibited from refusing to provide electric service to the clients of client agents," the draft preamble states

"While the commission will not prohibit REPs from verifying the agency authority of client agents before enrolling a client as a customer, the commission adopts the following language to reduce the compliance risk for REPs and facilitate quicker enrollments of this type: 'For purposes of complying with the requirements §25.474, a REP may rely upon the representations made by a client agent provided that the client agent is registered with the commission and provides evidence of agency authority,'" the draft preamble states

The draft proposal for adoption deletes the previously Proposed §25.486(h) (broker enrollments)

As previously proposed, the now-deleted §25.486(h) Broker Enrollments had stated, "A broker that is not an agent of a REP under §25.471(d)(10) of this title (relating to General Provisions of Customer Protection Rules) may enter into an agreement with a REP to assume all or part of the REP's responsibilities under §25.474 of this title (relating to Selection of Retail Electric Provider) for the purpose of enrolling applicants or customers for retail electric service," and had included additional requirements related to this

The Staff draft proposal for adoption does not include an earlier requirement that would have required brokers disclose to customers, "The names and commission certificate numbers for any REPs with which the broker has an agreement to recommend that REP to clients."

As first reported by, an earlier proposal in the proceeding would have prohibited brokers 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..."

This language is not included in the draft proposal for adoption.

Under the latest draft, brokers would be prohibited from, "Stating, suggesting, implying or otherwise leading a client to believe that receiving brokerage services will provide a customer with more reliable service from a transmission and distribution utility (TDU)."

The draft proposal for adoption would provide that, unless updated, a broker registration expires three years after the date of the assignment of a broker registration number or the registration’s most recent update. The draft does tweak the process with brokers required to file an "update" every three years, rather than a "renewal." Each registrant must submit the information required to update its registration with the commission not less than 90 days prior to the expiration date of the current registration.

Furthermore, any amendment filed by the broker (such as required filings to reflect material changes) would constitute an "update" to the license and re-start the three-year clock.

The draft proposal for adoption omits language from the strawman that would have required that brokers, "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 latest draft does provide that, "Each broker must ensure that clients have reasonable access to its service representatives to make inquiries and complaints, discuss charges on bills or any other aspect of the brokerage services provided to the client by the broker, terminate an agreement to provide services, and transact any other pertinent business."

Concerning broker registration, the draft provides that brokers must provide all business names of the registrant, limited to five business names

Concerning broker names, the draft preamble provides that the Commission would decline to add a provision prohibiting a broker from cobranding with a TDU, as requested by ARM and TEAM

The draft preamble states, "The commission agrees with AEP Energy that neither PURA nor commission rules prohibit a utility and its competitive affiliates from sharing the same or similar names. The relationship between brokers and TDUs does not justify adopting a different approach. Power Wizard’s and OPUC’s concern about customer confusion is addressed by the prohibition on misleading, fraudulent, unfair, deceptive, or anti-competitive communications in 16 TAC §25.486(d). TEAM’s concern that cobranding would lead to cross-subsidization between a TDU and a competitive affiliate is addressed by the restrictions on joint marketing contained in 16 TAC §25.272. Ultimately, a blanket prohibition on cobranding between a utility and a broker is not necessary to provide adequate customer protections for clients receiving brokerage services."

Under the draft, the Commission would also decline to add language prohibiting names that are duplicative of "The commission agrees with ARM’s observations that misleading branding is already prohibited under 16 TAC §25.486. Further, the commission maintains an active trademark on the phrase 'Power to Choose' and will defend it as necessary," the draft preamble states

Under the draft, the Commission would also decline to include a provision in the adopted rule that expressly prohibits broker names that are misleading, deceptive or duplicative of other registered entities (such as retail electric providers) because it is unnecessary. "The broker industry has been functioning for more than a decade and the commission is aware of only a few anecdotal examples of brokers attempting to use misleading names," the draft preamble states

"REPs that are concerned with their intellectual property being violated have other remedies available. Similarly, if a broker is misleading customers through the use of branding, the prohibited communications provisions of 16 TAC §25.486 would apply," the draft preamble states

While the draft would require the disclosure by a broker to the customer of an affiliation with a REP (as noted above), the broker would not be required to list such affiliation in its registration filed with the PUC

The draft provides that a broker is not permitted to sell, make available for sale, or authorize the sale of any client-specific information or data obtained unless the client authorizes the sale in writing.

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