Regulator's Staff Requests Proceeding To Consider Revocation Of License Held By "Exceptionally Large" Retail Supplier

June 29, 2021

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Office of Education, Outreach, and Enforcement (hereafter, "Staff") of the Connecticut PURA requested that the Authority issue a decision to re-open the electric supplier licensing docket of Liberty Power Holdings, LLC (hereafter, "Liberty") to consider revocation of Liberty's license

Under Staff's draft, Liberty could request a hearing prior to PURA adjudicating the issue of license revocation

As of May 31, Liberty was serving over 22,000 customers in Connecticut, based on the most recent migration reports (16,000 at CL&P, 6,200 at UI)

As previously reported, Liberty Power Holdings has filed a Chapter 11 bankruptcy proceeding, which, along with alleged unfulfilled financial obligations in Connecticut (RPS, taxes, etc.) cited by Staff, largely serves as the basis for Staff's recommendation, as noted further below.

Liberty has cited ERCOT market pricing during the winter weather event for its bankruptcy petition (See story here). Liberty has obtained DIP financing

However, concerning Liberty's experience in Texas, Staff alleged that, "Despite almost $300 million in revenue, Liberty still could not find a way to manage itself financially and avoid bankruptcy. The events in Texas might have been cataclysmic, but Liberty is not a small supplier that could honestly claim lack of preparation. As an exceptionally large supplier, Liberty should have been better financially situated to absorb the unforeseen without having to terminate all of its employees at the same time it filed for bankruptcy."

As previously reported, the employees at issue were originally employed by Liberty Power Corp., whose management and control was distinct from Liberty Power Holdings. Liberty Power Corp. was providing various operational services, via Liberty Power Corp. employees, to Liberty Power Holdings. Upon Liberty Power Holdings' bankruptcy filing, Liberty Power Corp. has said that it undertook the employee terminations because Liberty Power Corp. depends on revenue under the operational services contract with Liberty Power Holdings and because Liberty Power Corp. was not assured that Liberty Power Holdings would continue to compensate Liberty Power Corp. for services provided by such Liberty Power Corp. employees (and therefore Liberty Power Corp. would have no means to compensate such employees) . Liberty Power Holdings has itself hired most of the employees in a similar capacity. See more details in our prior story here

In a draft proposed order recommended by Staff, Staff proposed that PURA state, "By correspondence dated April 21, 2021 (Letter), the Authority noted Liberty’s bankruptcy filing in the U.S. Bankruptcy Court for the Southern District of Florida, that it recently had terminated all of its employees, and demanded that Liberty show proof of its managerial and financial capabilities. Liberty responded on May 5, 2021 (Response). In its Response, Liberty stated that it had terminated all of its employees on April 18, 2021, but re-contracted with the 'vast majority' of them on April 25, 2021. Regarding its bankruptcy, Liberty stated, 'With respect to the concern about the loss of revenue, as noted above LPH will continue to serve its customers… LPH filed for Chapter 11 largely as a result of the extreme weather event in Texas which was sudden and dramatic, causing an abrupt spike in wholesale costs of serving Electric Reliability Council of Texas ('ERCOT') customers due to unprecedented market prices for energy and ancillary services… LPH was forced to pay for the full costs of energy provided to Texas customers in order to maintain ongoing operations, and this large payment necessitated the bankruptcy filing.'"

In a draft proposed order recommended by Staff, Staff proposed that PURA find as follows: "The Authority finds that it does not demonstrate managerial capability for a supplier to terminate its entire workforce for one week. Although Liberty postures that 'services have not been impacted,' it fails to explain what occurred during the week in which Liberty was a shell without employees. Moreover, Liberty’s Response does not explain why its entire workforce was terminated and does nothing to alleviate the concern that it will not terminate all or a majority of its workforce again if its dire financial situation continues."

In a draft proposed order recommended by Staff, Staff proposed that PURA find as follows: "As Liberty admits in its Response, Liberty has filed for bankruptcy. In its 2020 Gross Assessment Liberty indicated it grossed almost $300 million in revenue, approximately $36 million of which was from Connecticut alone. Despite almost $300 million in revenue, Liberty still could not find a way to manage itself financially and avoid bankruptcy. The events in Texas might have been cataclysmic, but Liberty is not a small supplier that could honestly claim lack of preparation. As an exceptionally large supplier, Liberty should have been better financially situated to absorb the unforeseen without having to terminate all of its employees at the same time it filed for bankruptcy."

In a draft proposed order recommended by Staff, Staff proposed that PURA find as follows: "Liberty’s bankruptcy filings indicate it has only approximately $57 million in assets but more than $211 million in liabilities. In its bankruptcy filings, Liberty cannot estimate what it owes Connecticut in RPS obligations and assessments. See June 22, 2021, Official Form 206 (listing Connecticut Public Utilities Regulatory Authority as 'Undetermined,' p. 22 of 62, 2.11). Further, Liberty indicates it owes the Treasurer of the State of Connecticut $101,172.91. Id. at p. 24 of 62, 2.17. The Authority is currently aware that Liberty owes $22,632.78 in assessments, but has reason to believe this amount will increase as Liberty continues serving customers to date in 2021. For the same reason, the Authority cannot calculate Liberty’s precise RPS obligation at this time."

PURA has drawn on Liberty’s $250,000 bond based on these, as alleged by Staff, "unfulfilled obligations."

Specifically, PURA's Office of Education, Outreach, & Enforcement, in a letter to Liberty's surety provider drawing on the bond, stated, "The undersigned hereby certifies to the Company, with reference to Bond 1916874 that Liberty has failed to perform its duties as a Connecticut electric supplier or has violated the laws, decisions, or orders applicable to Liberty’s electric supplier license, and thus the undersigned is drawing upon the Bond in an amount equal to $250,000.00. Liberty has indicated it has shortages in its renewable portfolio standards compliance, its gross assessments, and its taxes owed to the Treasure of the State of Connecticut, in violation of Connecticut General Statues and Connecticut Agencies Regulations."

In a draft proposed order recommended by Staff, Staff said that, "Conn. Gen. Stat. § 16-245(g) makes compliance with RPS and payment of taxes and assessments a condition of maintaining an electric supplier license. Further, Conn. Gen. Stat. § 16-245(c) makes demonstration of financial and managerial capability a license condition. Liberty’s recent actions have demonstrated neither. Liberty’s actions in terminating all of its employees, apparently maintaining no workforce for one week, and failing to maintain sufficient financial stability to fulfill its obligaions [sic] show that Liberty has violated a condition of maintaining its electric supplier license and has not proven it has cured the violation upon being informed of it and being provided the opportunity to cure."

Staff proposed that PURA issue a decision providing that, "Based on Liberty’s failure to fulfill its licensing obligations as described above, and pursuant to §§ 4-181a, 16-9 and 16-245(k) of the General Statutes of Connecticut, the Authority hereby reopens the February 16, 2007 Decision in this docket to consider the revocation of Liberty’s electric supplier license. Liberty has a right to request a hearing, or oral arguments and briefs, by delivering to the Authority a written application within 20 days from the date of receipt of this Proposed Final and Reopening Decision. If a hearing or oral arguments and briefs is not requested, then this Proposed Final Reopening Decision will be voted upon by the Authority and, if adopted, will become a Final Decision in this docket and Liberty’s electric supplier license will be revoked effective the date of the Final Decision."

Docket No. 06-12-07

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