PUCT Staff Draft Preliminary Order Would Find No Per Se Waiver of §25.107 Exists for Small REPs

Under a draft preliminary order proposed by PUCT Staff, the Commission would determine that a limited load or customer count do not per se constitute good cause for a waiver from any of the requirements set forth in P.U.C. SUBST. R. 25.107(f) or (k). The draft preliminary order concerns Clearview Electric's petition for a waiver of the financial requirements of 25.107(f) due to its small customer base.

Staff noted that in adopting §25.107, the Commission rejected a financial test based on REP size, as the Commission concluded, "that the objective of the rule is to reduce the probability of REP default, and that the rule should more simply reflect that the REP has access to a sufficient level of financial resources to enter and operate in the market, rather than attempt to match the financial requirements with the REP's exposure to the market."

Staff apparently believes that answering this question is dispositive in addressing Clearview's petition, and Staff's draft preliminary order states that, with the threshold matter of whether a per se good cause waiver exists answered, "the Commission does not identify any issues that remain to be addressed in this docket."

However, Commissioner Kenneth Anderson, in a memo filed yesterday, suggested that the State Office of Administrative Hearings should conduct, "a broad analysis of Clearview and the way it has operated its business to determine if it qualifies it for a good cause waiver," in the absence of a per se waiver.

Anderson would have the SOAH proceeding address the following issues:

1) Given the size of its customer base and the manner in which it conducts its business operations, does Clearview have sufficient financial strength to participate in the ERCOT market?

2) Other than the $500,000 irrevocable stand-by letter of credit requirement of P.U.C. SUBST. R. 25.107(f)(1)(B), does Clearview comply with all the requirements of current P.U.C. SUBST. R. 25.107, that are applicable to it?

3) Given all the facts and circumstances, including without limitation, the manner in which Clearview manages its business and the size of its customer base, should the waiver be granted?

4) If the answers to 1), 2) & 3) are yes, what is the appropriate amount for the irrevocable stand-by letter of credit required by P.U.C. SUBST. R. 25.107(f)(1)(B) necessary to protect the market and Clearview's customers?

5) If the answers to 1), 2) & 3) are yes, what other requirements, including a prohibition on adding customers or marketing, should be imposed on Clearview until such time as they are in full compliance with all of the provisions of P.U.C. SUBST. R. 25.107 that are applicable to it?