Texas PUC Adopts Final Order Changing Letter of Credit Rules For Retail Electric Provider Certification

The Texas PUC adopted without modification a proposal for adoption that implements changes to the letter of credit (LOC) required for retail electric provider certification and related provisions, at 16 Texas Administrative Code (TAC) §25.107

Among other things, the final rule changes the content and language for irrevocable LOCs (ILOCs)

Under the final rule, changes to the REP Irrevocable Stand-By Letter of Credit template include conforming revisions to reflect the now-required electronic filing, including the prohibition on amending an ILOC without Commission approval, and the authorization for the Commission to present or terminate an ILOC by electronic transmission

The final rule clarifies and sets separate compliance deadlines for (1) the filing an electronic LOC under a previously adopted rule (§22.71), and (2) the filing a revised LOC to conform to the new changes required under the instant final rule (§25.107)

Beginning on the effective date of the revised REP certification rule at §25.107, any new ILOC [irrevocable LOC] executed for purposes of compliance with §25.107 must use the updated Commission template established under the final rule adopted today, and must be filed electronically in Project No. 37919.

In terms of the content of an ILOC previously submitted by a REP, existing ILOCs may continue to use the prior ILOC template until August 15, 2027, and may be maintained or amended using that template until that date. For REPs with existing ILOCs, the new ILOC under the rule adopted today must be used from August 15, 2027 forward

However, per a prior rule, by March 5, 2027, any REP relying on an existing physical ILOC must ensure that its current ILOC has been electronically filed in Project No. 37919 in accordance with separate rule §22.71. A REP is not required to transition to the new ILOC template by March 5, 2027, the final rule provides

A REP relying on a physical ILOC that has been previously scanned and filed is in compliance with the March 5, 2027 deadline

"By August 15, 2027, all existing ILOCs must be re-issued or amended to conform to the updated commission template. Accordingly, March 5, 2027 serves as the deadline for electronic filing of existing ILOCs, while August 15, 2027 serves as the deadline for transition of all existing ILOCs to the updated template," the final rule provides

Under the final rule, an ILOC requires a signature from a representative of the issuing bank who has the authority to issue an ILOC, rather than requiring that such signature must be from an executive officer of the bank

The PUC in the rulemaking declined at this time to adopt the use of additional financial assurance instruments, such as surety bonds, for REP certification

Compared to an earlier proposal, the final rule, "makes extensive revisions to the template language as recommended by REP Coalition in comments and informed by extensive outreach to third-party financial institutions conducted by commission staff."

See a full discussion of changes in the final rule, versus the original proposal, in ECM's prior story on a Staff proposal for adoption here. The Staff proposal for adoption was approved without modification, and the discussion in ECM's prior story is thus equally applicable to the final rule as adopted

The final rule amends the definition for affiliate as used in the REP certification rules, with affiliate now being defined as: "In contexts where the term refers to an affiliate of the REP or an affiliate of an applicant, any subsidiaries or sister companies of the REP or applicant that are registered or certificated with the commission or are registered with ERCOT as a market participant; and any company in the chain of corporate ownership of the REP or applicant up to the ultimate corporate parent company. In contexts where the term refers to an affiliate of the ultimate parent company of a REP or applicant, the term means any company with common control or beneficial ownership (i.e., direct or indirect ownership of at least 5.0% of voting securities) of the ultimate parent company. A principal may be an affiliate".

Project 59288