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Texas PUC Staff Say PUC May Draw On REP's Letter of Credit In Circumstances Other Than REP Certificate Revocation
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Staff of the Texas PUC and TexPo Power, LP said in a joint filing that the PUC's revocation of a retail electric provider's certificate is not the only condition under which Staff may draw on a REP's letter of credit
As previously reported, TexPo and Staff entered into a settlement agreement under which TexPo would relinquish its REP certificate, and under which proceeds from TexPo's letter of credit filed with the PUC would be used to partially satisfy amounts owed by TexPo to the TDUs (see full story here)
An ALJ had directed Staff and TexPo to justify the settlement's provision that the PUC may draw on the TexPo letter of credit in the absence of REP certificate revocation.
The ALJ cited the PUC's rules and a recent PUC order in which the PUC rejected a similar REP relinquishment settlement due to the lack of authority for the PUC to draw on a letter of credit due to certificate "relinquishment", not revocation
In response, Staff and TexPo assert that the Commission is expressly authorized to draw on TexPo’s letter of credit under 16 TAC § 25.107(f)(5)(D) due to the facts enumerated in the settlement agreement and without an order revoking TexPo’s REP certificate
Such subsection (D) provides that a REP's letter of credit may be drawn upon by the PUC if, "The [C]ommission’s executive director determines that a REP has failed to satisfy its financial obligations under PURA, the [C]ommission’s substantive rules, or the applicable independent organization’s protocols; and the financial resource expires in 30 days or less."
Non-payment of TDU charges would fall under such. Specifically, Staff and TexPo reported that TexPo failed to satisfy its financial obligations under Commission substantive rule 25.107(k)(16), and that TexPo’s letter of credit was expiring in less than 30 days at the time of the LOC draw.
Staff and TexPo asserted that the PUC's statements in adopting revisions to the certification rules also support Staff and TexPo's position, as the PUC through the modified rule had sought to expand the conditions under which the PUC could draw on a REP's security
Staff and TexPo said, "Under the previous version of the rule, the Commission was authorized to draw on a REP’s letter of credit under only two circumstances: if ERCOT performed a mass transition of the REP’s customers, or if the Commission issued an order revoking the REP’s certificate. However, the limitations of the former rule became apparent in the aftermath of the February 2021 Winter Storm, as certain REPs financially defaulted from the ERCOT market without experiencing mass transitions, but without the ability to renew soon-expiring financial resources maintained with the Commission for the purpose of satisfying outstanding debts."
Quoting discussion from the preamble in the order adopting the revised REP certification rule, Staff and TexPo said that the rule revisions grant the Commission with the authority to "immediately draw upon a financial instrument" and receive "immediate payment", because financial instruments may otherwise be cancelled or expire before a contested case proceeding may be resolved.
Staff and TexPo contrasted the instant proceeding with the case cited by the ALJ, in which the PUC had declined to approve a settlement for REP certificate relinquishment, which included an LOC draw, because the rule does not contain any provisions for an LOC draw in the case of a REP certificate "relinquishment".
Staff and TexPo said that, in such proceeding, settling parties did not provide a legal basis for the draw on the LOC, and such settling parties had argued that such draw was permissible because of the settlement among Staff and the REP, rather than being explicitly allowed under subpart (D) of the rule provision cited above. In the Texpo case, Staff and TexPo rely upon the specific rule's subpart (D) to support the LOC draw, rather than the draw being a voluntary agreement under the settlement
Staff and TexPo noted that, in the proceeding cited by the ALJ, the PUC had stated that the rule, "only permit[s] the Commission to draw on a REP’s financial resources for specific circumstances, including a revocation," [emphasis by Staff and Texpo], with Staff and Texpo noting that such language by the PUC does not limit LOC draws to revocations, and contemplates that there are other circumstances in which an LOC may be drawn upon
Staff and TexPo said that, "The parties to the instant proceeding emphasize that, when rejecting the settlement agreement in Docket No. 56201, the Commission did not hold that the Commission may only draw on a REP’s financial instruments if the Commission issues an order revoking the REP’s certificate; instead, the Commission recognized only that the Commission rules do not authorize the Commission to draw on a REP’s letter of credit in the absence of one or more of the circumstances contemplated under 16 TAC § 25.107(f)(5). In other words, the Commission’s decision in Docket No. 56201 does not preclude the Commission from drawing on a REP’s letter of credit in the absence of a revocation order when the draw is otherwise authorized under 16 TAC §§ 25.107(f)(5)(A), (C), or (D)."
Docket 59416
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April 20, 2026
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Reporting by Paul Ring • ring@energychoicematters.com
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