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Requested Waiver of Security Requirement Would Give Clearview Electric Competitive Advantage, PUCT Staff Says
July 13, 2011
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Granting Clearview Electric's requested temporary waiver of the REP certification financial requirements would provide Clearview with a "clear competitive advantage" over other REPs, PUCT Staff said in a post-hearing brief (38446).
As only noted in Matters, Staff is seeking revocation of the Clearview REP certificate for failure to meet the financial requirements under Subst. R. 25.107. Clearview is seeking a temporary waiver of the $500,000 letter of credit requirement, citing its small ERCOT customer base of what is now about 28 customers (see 2/15).
Staff noted that Clearview has roughly 37,000 customers in seven states nationwide, and that Clearview has testified that it is in compliance with and has met all the bond requirements for each of those states.
According to testimony, Staff said that Clearview is "trying to do a conservative approach" in the other states in order to create enough profitability to allow it to meet the $500,000 letter of credit requirement in Texas.
"Clearview has chosen to be in compliance in all of the states in which it operates, except Texas, and at the expense of Texas. By not complying with the rule, Clearview is essentially being allowed to treat non-compliance as a business cost. Furthermore, each month that Clearview continues to operate without the required letter of credit is another month that it does not put capital into customer protection," Staff said.
"Delaying the provision of adequate capital and/or providing a lower level of capital gives Clearview a clear competitive advantage over all the other REPs currently operating in the Texas market that have timely complied with the rule requirements," Staff added.
Staff reiterated that the Commission expressly rejected arguments that REPs with small customer books should face lower financial requirements during the 25.107 rulemaking.
"Allowing Clearview to provide a lower letter of credit than that required by the rule rewards noncompliance, allows Clearview to circumvent the rulemaking process, and permits Clearview to gain a competitive advantage over other REPs who have met the $500,000 letter of credit, regardless of customer base or load size," Staff said.
Clearview, however, called the $500,000 requirement unreasonable for its customer base, as it represents nearly $18,000 in posted credit per customer.
Clearview offered to post a $30,000 letter of credit, which would equate to over $1,000 per customer. Clearview also agreed to enter a consent order barring it from increasing its ERCOT customer base while the waiver of the $500,000 requirement is in effect.
Clearview called the proposed $30,000 level of credit more than adequate to cover any potential liabilities arising from its customer base in the unlikely event of default, as, under market rules, market exposure to default would not be more than six weeks. Even if the process from the first unpaid obligations, to default, and transition to POLR took six months, Clearview said that total liabilities would be only $27,372, based on average usage of $4,562 per month.
Regardless, Clearview reiterated that its conservative approach and management make any potential for default unlikely. Clearview also stressed that it is in compliance with all other provisions of the certification requirements and other Commission rules.
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