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City of Dallas Petitions for Rehearing of Dismissal of REP Application

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October 7, 2010

The City of Dallas moved for rehearing of the PUCT's recent decision to deny the city an Option 2 retail electric provider certificate, on the grounds that the Commission does not have authority to exclude municipal corporations from obtaining REP certificates (38630).

As only noted in Matters, the PUCT dismissed with prejudice the City's REP application because §25.107(a), governing the certification of REPs, expressly does not apply, "to the state, political subdivisions of the state, electric cooperatives or municipal corporations."

"Therefore, the applicant does not meet the criteria to obtain a REP certification pursuant to P.U.C. SUBST. R. 25.107," the PUCT concluded in its order of dismissal.

The PUCT further noted that pursuant to Subst. R. §25.107(a), an electric cooperative or municipally owned utility participating in customer choice may offer electric energy and related services at unregulated prices directly to retail customers who have customer choice without obtaining certification as a REP.

By citing this section, the PUCT's order intimates (though does not explicitly find) that the City of Dallas’ retail marketing arm could plausibly be considered a municipal utility, and thus sell competitive power at retail without a certification issued by the PUCT, similar to Nueces Electric Co-Op Retail Division.  

The City of Dallas' rehearing request does not address this question, but given that it is seeking rehearing to obtain a REP certificate, it appears that the City does not believe that it can retail power absent a certificate, unless it has some motivation to obtain certification even where certification is not needed (and such motivation is not apparent).

Although the City's rehearing request does not examine the PUCT's statement concerning municipally owned utilities, it appears there is ambiguity of whether the City can qualify as a municipally owned utility, and thus offer electric energy and related services at unregulated prices directly to retail customers without obtaining a certificate.

Subst. R. § 25.5 defines a municipally-owned utility as, "[a]ny utility owned, operated, and controlled by a municipality or by a nonprofit corporation whose directors are appointed by one or more municipalities."

However, Subst. R. § 25.5 does not define the term "utility," and it is unclear whether the City's retail marketing entity would qualify as a municipally-owned utility even though it does not own any transmission or distribution assets or have any ratebase.

Though it expressly excludes a municipal corporation, the PURA definition of utility, which cites the definition of "electric utility" under §31.002, provides that a utility is a person that owns or operates for compensation, "equipment or facilities to produce, generate, transmit, distribute, sell, or furnish electricity in this state."

In any event, in its motion for rehearing, the City argued that §25.107(a) does not expressly provide that a municipal corporation cannot be certified as a REP.

"To the extent, if any, that P.U.C. Subst. R. 25.107(a) as applied to the City disqualifies municipal corporations form [sic] being certified as REPs, the rule is not within the powers and authorities delegated to the P.U.C. by the Legislature and is invalid because it violates the express mandate of Tex. Util. Code § 39.352," the City said.

"Subsections 39.352(b) and (d) of PURA expressly requires the P.U.C. to issue a requested REP certification to any 'person' who satisfies the requirements of § 39.352(b)(4) and (d), and the City is a 'person' within the meaning of § 39.352 who met those requirements.  Moreover, § 39.352 authorizes no exclusions or disqualifications for municipal corporations and gives the P.U.C. no discretion to impose additional qualifications or disqualifications outside the statute on persons who apply for REP certification," the City argued.

"PURA does not contain a complete (exclusive) definition of the term 'person,' merely stating that 'Person' includes an individual, a partnership of two or more persons having a joint or common interest, a mutual or cooperative association, and a corporation, but does not include an electric cooperative.  Tex. Util. Code § 11.003(14).  There is no exclusion of 'municipal corporations' from the definition of 'person' in the PURA definition," the City said.

Accordingly, PURA compels the Commission to issue the City, as a person, a REP certificate if it satisfies the requirements of § 39.352(b)(4) and (d), the City contended.

Furthermore, the City said that if §25.107(a) does not apply to the City, "then the City asserts its right to REP certification by the P.U.C. directly from the statute."

   
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