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Texas PUC Adopts Final Broker Rule, Will Require Electric Brokers To Disclose How Broker Will Be Compensated, But Not Amount Of Compensation

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

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

Broker Registration Limited To Three Years, But Update Process Tweaked

May 1, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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The Public Utilities Commission of Texas had adopted a final rule for broker registration, which also includes customer protections for customers of brokers.

Aside from one change in the Staff's recommended preamble relating to whether REPs can refuse to accept customers from a broker using an agency relationship to enroll customers (e.g. concierge services), which is discussed in our related story today, the PUC adopted the Staff recommended proposal for adoption without modification

See our related story today concerning a change to the preamble about whether REPs are allowed to deny enrollments submitted by a concierge service, and Commissioners' concerns with this practice

A final written order was not yet issued. The story below is based on the adoption of the Staff rule without modification, apart from the preamble change noted above which did not affect rule language

Under the final rule, brokers will 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 will not need to be disclosed by the broker

In the final preamble, the Commission adopted Staff's language stating "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 final rule, brokers will 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 final rule 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 final rule 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 final rule rejects 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 final preamble will state

"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 final preamble will state

"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 final preamble will state

During the proceeding, Power Wizard had argued that delegating the verification of the agency authority to REPs is unnecessary and opens the door to potential anti-competitive abuses and discrimination by REPs against customers who use concierge services and other shopping tools to make better shopping decisions.

In discussing the decision to retain, in the rule, the authority of a REP to request evidence of a broker's agency authority, the Staff's draft preamble had recommended stating that, "The commission disagrees with Power Wizard's assertion that allowing REPs to verify the agency authority of a client agent opens the door to anti-competitive abuses by REPs. If, as Power Wizard describes, a REP prefers not to do business with concierge brokers, the commission's rule will not require it to do so."

However, in adopting the final rule, the Commission agreed with a recommendation from Commissioner Arthur C. D'Andrea to strike from the preamble the sentence, "If, as Power Wizard describes, a REP prefers not to do business with concierge brokers, the commission's rule will not require it to do so."

As noted, Commissioners' concerns with the ability of REPs to reject enrollments from concierge brokers is addressed in our related story today (click here)

The final rule includes language providing that, "A broker that is authorized to act as a client agent for the client must provide evidence of that authority upon request of the client, commission staff, or a REP with which the broker seeks to enroll the client."

The final rule 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 final rule 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 final rule

Under the final rule, brokers are 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 final rule provides 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 final rule 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) will constitute an "update" to the license and re-start the three-year clock.

The final rule 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 final rule 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 final rule provides that brokers must provide all business names of the registrant, limited to five business names

Concerning broker names, the final rule provides that the Commission declines to add a provision prohibiting a broker from cobranding with a TDU, as requested by ARM and TEAM

The final preamble will state, "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 final rule, the Commission declines 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 final preamble will state

Under the final rule, the Commission also declines 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 final preamble will state

"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 final preamble will state

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

The final rule 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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