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Texas REPs Concerned With Precedent From Texas Customer Complaint Case, SOAH Order Concludes Duty of REPs to Provide Advance Notice, Obtain Consent for Changes in TDU Pass-Throughs

October 2, 2014

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Copyright 2010-14
Reporting by Karen Abbott •

A coalition of retail electric providers has filed an amicus brief in a customer complaint case before the Public Utility Commission of Texas, warning that an order from the State Office of Administrative Hearings, through a misreading of the anti-cramming rule, erroneously requires retail electric providers to provide explicit advance notice, and obtain customer consent, for changes in TDU pass-through charges

As first reported by in June, when we noted the potential for wider market implications beyond a single customer, the complaint arises from an Ambit Energy customer being reclassified under the CenterPoint Energy Houston Electric tariff from "Commercial Under 10 KVA" to "Commercial over 10 KVA" due to installation of an in-line pole to power a cricket field.

The customer is disputing Ambit's pass-through of charges related to the reclassification.

In June comments opposing Ambit's motion for summary judgment, Staff of the PUCT said, "The REP shall inform the customer of the product or service being offered, including all associated charges, and explicitly inform the customer that the associated charges for the product or service will appear on the customer's electric bill before including any charges on the customer's electric bill," and said that a footnote in Ambit's contract regarding potential TDU rate changes did not meet this requirement (though at that time, Staff was not addressing the merits of the complaint, only whether Ambit was entitled to summary dismissal).

The REP Coalition, which does not assert a position as to the application of the facts of the complaint case or the overall disposition of the case, sought clarification of several legal issues and interpretations arising from the case.

Notably, the REPs said that SOAH Order No. 7 in the case concludes that the Commission's Customer Protection Rule regarding "Unauthorized Charges" imposes an additional requirement on the REP to provide explicit advanced notice and to obtain prior consent before passing through any changes in TDU charges. The order does so by determining that P.U.C. SUBST. R. 25.481(b)(1) applies to changes in TDU charges resulting from TDU Rate Schedule changes and "requires a REP to 'explicitly inform the customer' of any charges before those charges appear on the customer's electric bill."

"This conclusion is contrary to the language and history of P.U.C. SUBST. R. 25.481 and would be unworkable in practice," the REPs said.

"The language of this rule and its history demonstrate that this rule addresses what is commonly referred to as 'cramming.' The rule regarding unauthorized charges provides specific disclosure requirements as to services offered by the REP other than retail sale of electricity. This 'anti-cramming' rule serves a very important role in customer protection; however, the primary rule that governs the REP's communication with customers regarding retail electric service and the applicable TDU charges is P.U.C. SUBST. R. 25.475," the REPs said.

"P.U.C. SUBST. R. 25.481 applies to obligations of a REP regarding new products and services offered to an existing customer by a REP, not to the pricing of nonbypassable TDU charges applicable to the electric service for which the customer originally enrolled. It certainly does not impose a duty on a REP for unilateral actions taken by a TDU," the REPs said.

"The rulemaking history for P.U.C. SUBST. R. 25.481 also confirms that the rule applies to charges for services offered by the REP other than charges for retail electric service and the associated TDU charges. As originally proposed, P.U.C. SUBST. R. 25.481 would have allowed a REP to obtain a customer's authorization for a specific product or service by disclosing the itemized service in the REP's terms of service document. In filed comments, one TDU recommended that 'the [referenced] terms of service document ... should include all discretionary service fees in the TDU's tariff in order for the REP to pass on those fees to the retail customer.' In response, the Commission disagreed 'because this rule does not govern the relationship between the TDU and the REP,'" the REPs said.

"The statements in Order No. 7 regarding the applicability of this rule to TDU demand charges would apply equally to all TDU rates and charges that REPs may pass through to customers consistent with the Commission's rules. Similarly, Order No. 7 provides no basis to distinguish the applicability of the rule to ERCOT and TRE surcharges, which are similar charges that may appear as pass-through charges from a third-party entity on a customer's bill. The inapplicability of P.U.C. SUBST. R. 25.481 to the complaint in this case may not determinatively resolve the issues raised by the complaint as a matter of law, but this misstatement of the law must be clarified at a minimum. Any requirement of customer consent and prior notice for the pass-through of TDU and other third-party charges erroneously based on P.U.C. SUBST. R. 25.481 is unworkable and could have severe consequences to the continued function of the competitive retail market," the REPs said.

The REPs said that P.U.C. SUBST. R. 25.475 addresses the disclosure of TDU charges to customers, and this rule does not require the advance notice and consent envisioned by SOAH.

The REPs also sought to affirm that the TDU, not the REP, determines the customer's TDU rate schedule.

"Subchapter 4.3.6 of the Retail Delivery Tariff requires TDUs to establish, assign, and maintain the ESI ID for each retail customer. This same tariff provision includes the opportunity for the REP and the customer to provide information to the TDU to assist in determination of this Rate Schedule assignment, but it is the TDU that makes the assignment," the REPs said.

The REPs further noted that they have previously sought in rulemakings to require TDUs to provide 45 days notice of rate schedule changes, but such proposals have not been adopted.

"The REP Coalition supported a 45-day notice requirement so that it could better manage customer expectations in the event the customer's reclassification would impact the total amount of TDU charges the customer would pay under the new Rate Schedule ... Because the Retail Delivery Tariff does not impose any notice period requirement on a TDU when it changes a customer's Rate Schedule, a TDU is able to make such changes with no prior notice to the customer or the customer's REP whatsoever," the REPs said.

"It is important that any legal or policy determination made in the context of a customer complaint recognize the fact that a customer's Rate Schedule is determined by the TDU and can be changed by a TDU with no prior notice to the customer's REP. Any such change in a customer's Rate Schedule could have significant implications to the amount of TDU fees paid by the customer," the REPs said.

Docket 42111

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