Texas PUC adopts new rules governing retail electricity brokers

CUSTOMER PROTECTION AND COMPLIANCE OBLIGATIONS: 16 TAC §25.486.
 

This rule establishes compliance requirements for Brokers, including certain required information disclosures. Of note, the rule applies to a Broker’s interaction with a “Client”, which is defined as a person who either receives or solicits brokerage services. 16 TAC § 25.486(b)(3).  The Order clarifies that the rule regarding communications and certain obligations applies even to a person that is considering the services of a broker, including a person that merely visits a Broker’s website. Order at 40.

A Client that is not a residential or small commercial customer may agree to a different level of customer protection relating to the brokerage services, provided that the agreement is in writing and does not alter the level of customer protections the Client receives in the provision of its retail electric service. 16 TAC § 25.486(c). 

 

 

All written, electronic and oral communications, including advertising, websites, direct marketing and billing statements produced by a Broker must include the Broker’s registered name and must be “clear and not misleading, fraudulent, unfair, deceptive or anti-competitive.” 16 TAC § 25.486(d)(1). This provision provides several examples of prohibited communications, including falsely stating or suggesting that brokerage services are provided without compensation to the Broker; falsely suggesting that the Broker is a representative of a REP, a utility, or an aggregator; and stating or suggesting that a Client will receive more reliable electric service from the utility if it uses the services of the Broker.

 

Required Disclosures

16 TAC § 25.486(f) sets forth certain information disclosures that a Broker must make “prior to the initiation of brokerage services, the renewal of those services, or a material change in the services provided, or the terms and conditions of the services.”  In its Order, the Commission stated that the disclosure requirement “does not apply to brokerage services that were initiated prior to the adoption of these rules”, although these Clients should receive the disclosures upon the renewal of or material change in the brokerage services. Order at 55–56. The required disclosures include the following:
 

Compensation

The rule does not prescribe the method or amount of compensation that may be received by a Broker, nor who must pay the Broker. Further, while the rule does require the Broker to disclose how and by whom it will be compensated, the Commission specifically declined to adopt a provision requiring disclosure of the amount of compensation a Broker receives from a REP, noting that “[t]he knowledge that a broker is being compensated by a REP is enough to alert a client to possible conflicts of interest while respecting the proprietary practices of brokers” and stating that nothing shall prevent a Client from requesting the compensation amount from the Broker. (Order at 60–61; see 16 TAC § 25.486(f)(6)).

The Commission also addressed the requirement that a Broker not bill or cause to be billed an unauthorized charge on the Client’s retail electric bill. In response to a question from a REP seeking clarification of whether a Broker can authorize the amount of its fee that will be embedded in an energy charge billed by the REP (or whether the customer must explicitly authorize the fee), the Commission stated that “If the broker compensation is included as part of the energy charge to which the customer agreed, then no explicit customer authorization is required. In this regard, the broker fee is no different than marketing or any other cost that is embedded into the price of electric service offered by the REP. If however, the broker’s fee appears as a separate charge on a REP’s bill…[then] a customer must clearly and explicitly consent to obtaining a product or service offered and to having the associated charges appear on the customer’s electric bill.” Order at 30–31. It should be noted that in either instance, the Broker must still disclose to the Client how it is being compensated. 16 TAC § 25.486(f)(6).

Client Agency Relationships

A Broker is a “Client Agent” if it has the legal right and authority to act on behalf of the Client regarding the selection of a REP, enrollment for retail electric service, or contract execution for a service offered by a REP. 16 TAC § 25.486(b)(4). The rule imposes specific obligations on a Broker that is a Client Agent, including additional disclosures such as an explanation of how the Client’s proprietary information will be used, protected and retained by the Broker. 16 TAC § 25.486(g)(2)(E). A Broker that is a Client Agent must produce written evidence of such agency upon request by the Commission or a REP with whom the Broker is seeking to enroll the Client. 16 TAC § 25.486(g)(3).

Compliance Obligations and Prohibitions