On May 1, 2020, the PUCT adopted regulations implementing §39.3555 in Title II of the Texas Utilities Code, which was passed by the Texas Legislature in 2019 requiring any person that provides “brokerage services” for compensation to register with the Public Utility Commission of Texas (PUCT or Commission) as a Broker. The new rules, 16 Texas Administrative Code (TAC) §§ 25.112 and 25.486, establish the registration and compliance obligations for Brokers in Texas.
BROKER REGISTRATION REQUIREMENTS: 16 TAC §25.112
Definition of Brokerage Services
A person may not provide “brokerage services”, including online services, for compensation unless the person is registered as a Broker. 16 TAC § 25.112(a). “Brokerage services” are broadly defined as “providing advice or procurement services to, or acting on behalf of, a retail electric customer regarding the selection of a REP [Retail Electric Provider], or a product or service offered by a REP.” 16 TAC § 25.112(b)(2). In the PUCT’s Order Adopting New Sections 25.112 and 25.486, (Order), the Commission made clear that it does not matter how the person is compensated for providing such services. Order at 10. For example, a consultant who is paid on an hourly basis directly by the retail customer still falls within the definition of a Broker if the consultant is providing advice regarding the selection of a REP or a specific product.
Both the statute and the rule provide that a REP may not knowingly provide bids or offers to a person who provides brokerage services for compensation and who is not registered as a Broker. 16 TAC § 25.112(a). This section of the rule clarifies that a REP may rely on the list of Brokers published on the PUCT’s website to satisfy this requirement. This section further provides that a Broker is responsible for all activities conducted on its behalf by any subcontractor or agent.
Registration and Renewal Requirements
To register, a Broker must use the registration form prescribed by the PUCT and available on the Commission’s website at
www.puc.texas.gov. 16 TAC § 25.112(d). The form must be notarized and signed by an owner, partner or officer of the registrant, stating that it will comply with all applicable law and rules. 16 TAC § 25.112(c)(7).
In its Order, the PUCT clarified that any person that is registered as a Broker on an interim basis will not be required to re-register and the interim registration shall be accepted as a final registration. Order at 4–5.
The registration is designed to be simple and requires information relating to the name and contact information for the Broker, including the type of business organization and any DBA names, principal place of business, customer service contact information, and regulatory contact information. 16 TAC § 25.112(c). Upon receipt, the Commission will review and will accept or reject the registration within 60 days of receipt of a complete application. 16 TAC § 25.112(d)(3)(B).
A broker must update its registration within 30 calendar days of the effective date of any changes to the information provided. 16 TAC § 25.112(f). In addition, a Broker’s registration must be updated at least every three years from the date of the last update to remain valid. 16 TAC § 25.112(e). Each registrant must update its registration no less than 90 days prior to the expiration date of the Broker’s current registration. The Commission noted in its Order that it would not send renewal notices and that Brokers are responsible for ensuring compliance. Order at 28.
The Commission may impose administrative penalties on a Broker for violation of PURA or the Commission’s rules and may also suspend or revoke a Broker’s registration for significant violations, including engaging in fraudulent, unfair, misleading, deceptive or anti-competitive practices. 16 TAC § 25.112(g).
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).
Communications
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:
- Broker’s registered name, address, mailing address, contact information and PUCT registration number;
- registered name of any REP that is affiliated with the Broker;
- clear description of the services the Broker will provide for the client;
- the duration of the agreement to provide brokerage services, if applicable;
- a description of how the Broker will be compensated for providing brokerage services and by whom;
- how the client may terminate the brokerage services and the amount of any fee or other cost the client will incur for termination; and
- the PUCT’s telephone number and email address for complaints and inquiries.
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
A Broker must comply with specified obligations under 16 TAC § 25.486. A Broker may not:
- bill or cause to be billed an unauthorized charge on a customer’s retail electric bill;
- switch or cause to be switched the Client’s REP without first obtaining the Client’s authorization;
- unduly discriminate in the provision of brokerage services; and
- release (including to a REP) or sell proprietary Client information unless the Client authorizes the release in writing.
Record Retention, Client Access and Complaints
The regulations require a Broker to provide reasonable access to customer service representatives and to promptly investigate customer complaints. 16 TAC § 25.486(k)(1). In the event of a Client complaint, the Broker must notify the complainant of the PUCT’s complaint resolution process and provide contact information for the PUCT within 21 days of receiving the complaint. Clients have the right to initiate a complaint with the PUCT and a Broker may not impair this right for a residential or small commercial customer, including requiring alternative dispute resolution or mediation prior to filing a complaint. 16 TAC § 25.486(k)(2). A Broker is required to maintain records demonstrating its compliance with the Commission rules and regarding any Client complaint for no less than two years and such records must be provided to the Commission within 15 days of a request. 16 TAC § 25.486(l).
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