Switching Process for Sold Milagro Customers Begins As Deal Restructured

Updated 11:00 EST with info from Open Meeting, see last two grafs

The switching process for Milagro Power customers has already commenced after an asset purchase agreement was structured such that the sale of the customer book has closed separate from the sale of Milagro's REP certificate, PUCT Staff reported to the Commission (37753).

Milagro is facing a pending REP certificate revocation, and Commissioners had given Milagro until the April 6 open meeting to sign a definitive sale agreement, which would prevent a POLR transition for Milagro's 3,200 customers, before acting on a final order regarding revocation (see 3/24). Milagro filed a signed sale agreement last week (4/1).

Staff said that the final sale agreement, filed confidentially, separates the sale of customer accounts and the transfer of the REP certificate.

The transfer of the customers is being made to two existing certificated retail electric providers currently in good standing with the Commission, Staff reported, removing a potential hurdle regarding the transition of the customers to a non-POLR provider. Originally, the pro forma sale agreement was described as selling the Milagro REP certificate, and associated customers, to an entity which itself was not certified as a REP by the Commission, but which was owned by two certified REPs. Commissioners had debated whether the sale could proceed in such a fashion since the purchaser itself was not a REP.

With the customer books now being sold directly to the two unnamed REPs, there is no longer any issue with moving the customers to the purchasers, and avoiding a POLR drop. Staff understands that the sale of the customer accounts closed on April 4. Furthermore, Staff said that it was informed by "the buyer" that the transfer of the customer accounts has commenced, with switches already requested for approximately 27% of the customer base. Although the agreement remains confidential, there is a finite number of parent companies in the market which have multiple REP certificates, which would fit the description of the transaction.

All the switches should be requested by May 6, Staff said.

As a separate matter, Staff said that the sale agreement also contemplates the sale of the Milagro retail electric provider certificate. The transfer is conditioned upon prior Commission approval of an application to amend the retail electric provider certificate, Staff reported. To date, the amendment application has not been filed, and no information regarding the ultimate purchaser, or their suitability, has been provided. Under the terms of the agreement, the buyer is required to file its application by April 14.

Staff believes that the sale of the retail electric provider certificate is no longer a time-sensitive matter because the customer accounts are already being transitioned to retail electric providers in good standing, mitigating the risk associated with Milagro Power's expiring letter of credit (which expires May 21).

Therefore, Staff said that an expedited review of the suitability of the Milagro certificate buyer is not necessary. Staff said that if the Commission wishes for Staff to entertain the potential application, it would be appropriate to abate the Milagro revocation proceeding until a decision has been made on the application.

At today's open meeting, Commissioners heard from Milagro and agreed that the modified customer sale process is appropriate and may proceed. The identity of the two acquiring REPs was not disclosed.

The Commission agreed with Staff's recommendation to abate the revocation proceeding to now consider the sole issue of the sale of the REP certificate and whether the buyer of the certificate would meet certification standards.