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Proposed Texas Order Would Revoke Milagro Power Company REP Certificate
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February 9, 2011
A proposed order from a Texas ALJ would grant PUCT Staff's petition to revoke the REP certificate of Milagro Power Company (Dockets 37753 & 38138).
The proposed order does not represent final Commission action, or formal adjudication on any issues, which must come in a final order from the Commission.
The proposed order, from a State Office of Administrative Hearings ALJ, is the first draft order in several separate, but similar, contested revocation proceedings related to the new REP certification standards. There have been other proposed, and final, orders relating to defunct REPs, but these were not contested.
Milagro purchased the certificate previously held TexRep3 LLC.
"Although Milagro has provided retail electric services since its acquisition of the REP, Milagro does not have the resources to demonstrate its ability to provide continuous and reliable retail electric service to its customers. The lack of resources is a significant violation under the law," the ALJ found in the proposed order, with the proposed finding based on SUBST. R. 25.107(g) as it existed effective May 21, 2009.
As described in the proposed order, in December 2002, William Wydler, Milagro's president,
was the subject of an agreed disciplinary order by the Securities and Exchange Commission,
barring him from associating with any securities broker-
"By virtue of its principal's history of administrative and judicial sanctions, Milagro does not have the technical and managerial resources and ability to provide continuous and reliable retail electric service to customers as required by former P.U.C. SUBST. R. 25.107(g)," the ALJ found in a proposed conclusion of law.
Although Wydler testified that he had only a supervisory role in the investment matters and only settled with the SEC on advice of counsel and due to the costs of litigation, the ALJ's proposed order concludes that, "[such] evidence did not overcome the greater weight of the facts that led to the actions of the SEC and the federal court, nor did Milagro's evidence contravene the weight of the administrative and judicial action that were taken in response."
The proposed order also examines an investigation by the Texas Department of Savings and Mortgage Lending into two complaints against Wydler and Carlos Alvarez, Milagro's treasurer and director, about allegedly improper lending practices.
Milagro showed that the two principals had cooperated with the Department's investigation and that the Department had: (1) taken no action against Wydler; (2) allowed Wydler to continue operating until his mortgage broker license expired in 2009; and (3) issued Wydler a mortgage broker license between the time the Department began its investigation and the date on which Wydler's license expired.
Although the proposed order finds that the evidence in the Department complaints is insufficient to sustain Staff's argument that the complaints show a lack of managerial competency, the ALJ's proposed order does find that the complaints were still required to be disclosed by Milagro during its REP application process, regardless of their final adjudication.
"Milagro was obligated to disclose any complaint histories associated with its principals.
The Commission need not consider whether the Department issued or refused to issue
a license or a disciplinary order. The rule required Milagro to disclose whether
complaints were filed with a regulatory agency against Milagro's principals during
the three-
"By failing to disclose the existence of the SEC administrative order, the related federal court judgment, and the Department inquiry, Milagro made material omissions and misrepresentations to the Commission in pending docket No. 37753," the proposed order finds.
Additionally, the ALJ found that, "evidence reflects that Milagro did not continuously maintain all applicable financial requirements in P.U.C. SUBST. R. 25.107(f). Specifically, Milagro did not meet the substantive rule requirements for the protection of customer deposits and advance payments."
The ALJ concludes in the proposed order that the violations found in the proposed findings of fact and proposed conclusions of law, "constitute significant violations," and that, as such, "Milagro's REP certificate should be revoked."
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