Pennsylvania to Require Licensing of All Intermediaries Involved in Natural Gas Procurement (Brokers), Carves Out Limited Marketing Exemptions

The Pennsylvania PUC has issued an Advance Notice of Final Rulemaking which would revise the natural gas market rules such that all natural gas brokers and aggregators are required to be licensed, but that certain non-selling marketers and non-traditional marketers are excluded from licensing.

Under the current rules, natural gas brokers and aggregators are not required to be licensed (in contrast to the electricity market), but the PUC has granted licenses to many such entities which have sought licensure. The current rules also define a "marketing services consultant," which includes agents and other intermediaries not involved with physical natural gas supply or customer billing, and holds that such entities do not require a license.

The Advance Notice of Final Rulemaking removes the definition of marketing services consultant and related licensing exemption.

It would also add definitions for broker and aggregator, and require such entities to be licensed.

Specifically, under the Advance Notice of Final Rulemaking, a broker is an entity, licensed by the Commission, "that acts as an agent or intermediary in the sale and purchase of natural gas but does not take title to natural gas supply."

Under the Advance Notice of Final Rulemaking, an aggregator is an entity, licensed by the Commission, "that purchases natural gas and takes title to it as an intermediary for sale to retail customers."

The PUC further said that procurement consultants that act on behalf of the customer fall within the definition of broker, and must be licensed.

"[T]here has been a growth in the number of entities offering to provide energy consulting services to consumers. We agree that these energy consultants work on behalf of consumers as intermediaries between the consumer and an NGS [natural gas supplier]. As such, these 'energy consultant' activities fall within the definition of 'broker' and, therefore, entities that provide energy consultation services for consumers would be required to obtain a license from the Commission," the PUC said.

The PUC said that it still believes that an exemption from licensing for certain entities providing "marketing" services either, (a) on behalf of the members of a civic or other community-based organization, or (b) on behalf of a single NGS, should remain intact.

To clarify which marketing entities are not subject to licensure, the PUC Advance Notice of Final Rulemaking would define two new types of entities, which are not subject to licensure, as follows:

• Non-Selling Marketer: A commercial entity, such as a telemarketing firm, door-to-door company or auction-type website, that provides marketing services to retail customers for a licensed NGS's natural gas supply services.

• Nontraditional Marketer: A community-based organization, civic, fraternal or business association, or common interest group that works with a licensed NGS as an agent to market natural gas service to its members or constituents. The nontraditional marketer may not require its members or constituents to obtain its natural gas service through a specific licensed NGS and may not be compensated by the licensed NGS if members or constituents enroll with the licensed NGS [emphasis added]

"[A] 'marketer' that operates under an exclusive contract with a single licensed NGS supplier to conduct natural gas-related marketing and sales activities in its service territory should not be required to be separately licensed by the Commission. Conversely, a marketer that works directly with an end-user customer or simultaneously represents more than one licensed NGS should be required to obtain a license," the PUC agreed.

"We agree with the commenters that the line of accountability back to a single NGS is clear where there is a direct relationship and the NGS will be directly responsible for the marketer's activities and for reporting requirements under Section 62.110(a)(3). Accordingly, we will incorporate this concept into the regulations and provide that a 'non-selling marketer' under contract to a single NGS will not be required to obtain a license."

"As to 'non-traditional marketers,' we will retain a definition for this term and exempt these entities from a licensing requirement. Non-traditional marketers are community-based organizations, civic, fraternal or other groups with a common interest that work with a licensed NGS to endorse that NGS' natural gas supply service to its members. The members are not required to purchase the services from the endorsed NGS and if the offer is accepted the contract is between the member and the NGS," the PUC said.

Docket L-2011-2266832