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PSC Staff Says Altering Retail Supplier Financial Requirements Outside Of Rulemaking Could Violate Court Precedent
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Staff of the Maryland PSC said that changing the financial requirements for retail energy supplier licensing outside of a rulemaking could violate state court precedent which has found that orders adopting new regulations outside of rulemakings have no effect.
As previously reported, the Office of People's Counsel has recommended, among other things, that retail supplier bonding requirements be tiered, with the required security potentially amounting to up to $2 million. While OPC supports a rulemaking to accomplish such, OPC has argued that the PSC's "broad" authority under statute over retail supplier licensing generally permits the PSC to adopt a package of OPC recommendations regarding licensing (addressing other license issues in addition to bonding) on a case by case basis where appropriate while a rulemaking is conducted (OPC in comments generally stated that, "OPC urges the Commission to initiate a rulemaking to adopt the reforms proposed herein and, in the interim, to implement these protections through case-by-case orders where appropriate," and that, "While the rulemaking process is under way, OPC recommends that the Commission apply the proposed requirements through case-by-case orders to prevent further erosion of regulatory oversight," but OPC did not specifically state that higher bonding amounts for individual suppliers should be adopted outside of a rulemaking)
However, because there are already existing retail supplier financial fitness regulations in COMAR, Staff said that any policy change outside of a rulemaking could violate the holding set forth in Delmarva Power & Light Co. v. PSC, 803 A.2d 460.
In Delmarva, the court held that a PSC order had no effect because the order constituted a regulation as defined in the Administrative Procedure Act (APA), and the PSC in such instance did not follow the APA in adopting such order
Summarizing the court's finding, Staff said that policies that are general in nature and that have future effect must be established by regulation through the process set forth in the APA
"Here, one of the substantive issues is the financial integrity test and the Commission’s related bonding authority. The financial integrity test and the Commission’s related bonding authority are both general in nature and have future effect, and are the subjects of existing regulations," Staff noted
Any change to such policies outside of a rulemaking could violate the Delmarva precedent
The policies that are already set forth in COMAR [such as the financial fitness rules] should be modified by a revision to COMAR, Staff said
Concerning requests for supplier license relinquishments, Staff, at this time, does not recommend any direct delegation of authority to Staff for license relinquishments and modifications, unless the Commission determines that the Commission does not need to revise the financial integrity and bonding provisions of COMAR 20.54.02.08A and COMAR 20.51.02.08H.
To the extent the PSC believes that the supplier financial requirements should be changed, Staff recommends that the Commission direct Staff to confer with interested stakeholders and submit proposed changes to COMAR within 90 days of a Commission decision to proceed on this matter.
Staff recommends that the Commission itself (not a delegation to Staff) approve a retail supplier’s request to cancel or modify its license under certain conditions: 1) the supplier must have no history of complaints with CAD [the PSC's consumer affairs division], or prove that all complaints were resolved; 2) the supplier must submit proof of compliance with the reporting requirements of Order No. 91463 [concerning legacy customers on POR] and Order No. 91638 [reports on prices and usage as a billing entity]; 3) the supplier must be current with all Commission assessments; and 4) the supplier must be fully compliant with all elements of §§ 7-507 and 7-603 of the PUA and all other relevant federal and state law.
For license renewals, Staff supports delegation of direct authority to Staff to process renewal applications under certain conditions
Staff supports the delegation of direct authority to process renewal applications under the following specific conditions: 1) the supplier must have "no history" of complaints with the Commission’s Division of Consumer Affairs (CAD); 2) the supplier must submit proof of
compliance with the reporting requirements of Order No. 91463 and Order No. 91638; 3) the supplier must be current with all Commission assessments; 4) the supplier must be fully compliant with all license requirements set forth in §§ 7-507 and 7-603 of the PUA and all other applicable federal and state law; and 5) the supplier, or its designated representative, must have passed the education and training requirement established by § 7-311 of the PUA.
"If any of these conditions are not satisfied, the license renewal application would be scheduled for an Administrative Meeting," Staff said
"Staff believes that this recommendation would reward good actors in the supply market and streamline approval of numerous renewal applications," Staff said
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July 2, 2025
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Reporting by Paul Ring • ring@energychoicematters.com
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