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Double Whammy: Texas City Challenges PUCT for Purview over REP

January 11, 2016 By Cheryl Kaften

Houston-based AP Gas and Electric (APG&E), a retail energy provider (REP), filed with the Public Utility Commission of Texas (PUCT) (Docket No. 45486) on December 30, requesting that a declaratory or other order be issued, “stating that the mayor of the city of McAllen … exceeded the city’s jurisdiction when hearing and ruling on [a] complaint” brought by LFD Home Furnishings.”

The order is needed, according to APG&E, because the city and its mayor lacked jurisdiction to:

  • Hear LFD’s complaint,
  • Find that early termination fees assessed against LFD Home Furnishings were excessive, or
  • Order APG&E to apply a credit to LFD’s account in the amount of $246,322.77 representing the early termination fee.

The case harks back to December 2013, when APG&E received a signed and executed 36-month contract from an authorized representative of LFD.

Everything was fine for six months. Then, APG&E received an “Inbound Drop” on the account on June 3, 2014 – much earlier than the end of the service agreement, which ran through December 6, 2016. Therefore, APG&E assessed an early termination fee on the account pursuant to the contract terms, pursuing collection actions in the amount of $246,322.71.

LFD refused to pay the balance left on the account and filed a complaint against  APG&E with the PUCT. By letter dated June 12, 2015, the PUC Customer Protection Division (CPD) denied the complaint – finding that “APG&E billed LFD’;s account according to the signed agreement and because the service ended before the contract expired, an early termination fee was properly assessed.” LFD did not pursue a formal complaint with the commission, as provided for under 16 Tt.x. ADMIN. CODE § 22.242(d).

As APG&E recounts the situation in its filing, “Instead, upon receiving this unfavorable determination from the PUC’s CPD, LFD filed this same complaint with the City of McAllen. The City of McAllen agreed to hear LFD’s complaint and set a hearing on the complaint for November 11 …, citing jurisdiction under PUC PKOC. R. § 22.242….”

The ball was now once again in APG&E’s court. “By letter dated November 6,” APG&E further reports, through its own legal representation it asserted that the City of McAllen does not have jurisdiction over LFD’s complaint “because APG&F, is not an electric utility.”

However, APG&E stated, “Despite the lack of jurisdiction … the city’s mayor, at the hearing, granted LFD’s request, found the complaint valid, and cancelled the early termination fee assessed on the account,” adding, “APG&E continues to maintain that the PUCT is the proper venue for any customer complaint on this matter.”

Finally, in its request for the declaratory order, the retail supplier warned that the issue before the PUCT could have broader ramifications in the future. ““When a city attempts to regulate a retail electric provider (REP) in this manner, it invalidates the commission’s exclusive regulatory authority over REPs, and thwarts its ability to establish and implement consistent customer protection standards. If the Commission fails to act in this instance, the potential exists that every city in restructured areas will adjudicate customer complaints and effectively establish an extra-statutory regulatory scheme for retail electric service – resulting in REPs being subjected to a patchwork of different, and potentially conflicting, local regulatory standards.

“… Allowing customer complaints against REPs to be heard by cities … threatens needed regulatory consistency and therefore represents a potentially grave threat to the vitality and competitiveness of the Texas retail market and is contrary to the state’s carefully established regulatory scheme, established in 1999 by Senate Bill 7,” APG&E said.

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