Texas PUC Staff Move To Close Investigation Of Property Management Company Regarding Tenants' Ability To Choose A REP, Without Adverse Finding -- EnergyChoiceMatters.com

Texas PUC Staff Move To Close Investigation Of Property Management Company Regarding Tenants' Ability To Choose A REP, Without Adverse Finding

November 10, 2023

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Reporting by Paul Ring • ring@energychoicematters.com

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Staff of the Texas PUC moved to close an investigation of Texas Excel Property Management Corporation (Texas Excel or TEPM) for potential alleged violations related to the alleged denial of tenants’ rights to choose a retail electric provider in areas of the state in which retail customer choice has been introduced, as well as the alleged unauthorized resale of electricity.

See background on the investigation, and the rules ensuring customer choice for tenants, here

Staff said, "Based on information obtained during the formal discovery conducted under this proceeding, Commission Staff has determined that Texas Excel did not violate any law or Commission rule and now files this request to close this docket without further action."

Staff said, "Because Texas Excel did not resell electricity to its tenants, as was provided for in its 'All Bills Paid' (ABP) lease, but rather provided electricity as an incidence of tenancy, Commission Staff concludes that Texas Excel did not violate its tenants’ right to choose a REP. When electricity is provided as an incidence of tenancy, the right to choose a REP is not implicated. Texas Excel tenants did have the option to choose a REP if the tenant entered into a non-ABP lease. Therefore, Texas Excel did not interfere with its tenants’ right to choose a REP."

Staff said, "Based on Texas Excel’s discovery responses, Commission Staff concludes that, had Texas Excel adhered to the terms of its ABP lease, it could have violated PURA §§ 17.004(a), 39.102(a), 39.107(c), and 39.352(a); and 16 Texas Administrative Code (TAC) §§ 25.107(a)(1)(A) and 25.475(c), or interfered with tenants’ rights thereunder, by engaging in the unauthorized resale of electricity to its ABP tenants. Specifically, ABP tenants leased units from Texas Excel at a rental rate that included the cost of electricity as a cost 'incident to the lease.' However, the ABP lease limited the amount of electricity usage that it considered 'incident to the lease' and stated that costs for excess usage would be billed to the customer by Texas Excel separately from their rent. Because Texas Excel was the customer of the retail electric provider (REP) of record for each unit under the ABP plan and does not itself hold a REP certificate, separately billing customers for excess usage would have constituted unauthorized resale of electricity. However, Texas Excel did not, in practice, charge its tenants any additional amount over their monthly lease payments for electric service and therefore did not commit violations."

Staff said, "Further, Texas Excel demonstrated that, subsequent to the opening of this proceeding, it transitioned all of its tenants off its APB lease and has since reported that no tenants remain on the ABP plan under which Texas Excel was able to charge tenants for electric usage. Given Texas Excel’s efforts to remedy a situation in which it could have violated the statutes listed above, Commission Staff, concurrent with this filing, is issuing a warning letter to Texas Excel and closing its internal investigation."

In such warning letter, the PUC's The Division of Compliance and Enforcement (DICE) said, "TEPM owns and operates 24 multi-family residences in Texas. TEPM maintained a continuous service agreement with retail electric provider TXU Energy Retail Company, LLC (TXU) for the purpose of maintaining electric service for vacant apartments. Upon move-in, TEPM offered its tenants two methods to enroll in electric service at its properties: one option allowed tenants to participate in an 'all bills paid' (ABP) plan, in which TXU continued to provide electricity to the tenant’s unit under the continuous service agreement and TEPM included the cost of electricity in customer rent, while another 'not all bills paid' option allowed customers to select their own REP and be responsible for their electricity billing. When a tenant selected the ABP option, TEPM—rather than the tenant—remained the customer of record with TXU under the continuous service agreement. Moreover, the ABP lease explicitly stated that there was a limit to the electricity included in the rent payment and any usage above that limit would be separately billed to the customer by TEPM."

DICE said, "If TEPM had adhered to the terms of its ABP plan, it would have taken title to electricity purchased from TXU Energy and then resold that electricity to the end use consumers, the ABP tenants in instances where a tenant’s usage exceeded that which was allowed under the lease. By doing so, TEPM would have effectively acted as a REP without the required certification. Accordingly, through its ABP billing practices, TEPM would have violated PURA § 39.352(a) and 16 TAC § 25.107(a)(1)(A) by becoming a customer in the initial purchase of electricity from a REP and reselling electricity to end use consumers."

DICE said, "Importantly, 16 TAC § 25.471(a)(3) states that the customer protection provisions set forth under Subchapter R of the Commission’s rules are minimum, mandatory requirements that shall be offered to or complied with for all customers. If TEPM had charged its tenants for electricity under its ABP lease, it would have taken title to then resold electricity to its ABP tenants, and TEPM’s ABP tenants -- the actual retail customers -- would have been denied access to the customer protections and safeguards under Subchapter R."

DICE said that specific rights and protections for tenants which could have been negated had TEPM resold electricity include:

• Customer Disputes: ABP Tenants would have been unable to dispute their electric charges with the provider as allowed under 16 TAC § 25.480(f).
• Reasonable Access to the REP: By becoming the customer of a REP and reselling electricity to its tenants, TEPM would have prevented its tenants from having the reasonable access to the REP of record for their unit as required under 16 TAC § 25.485(b).
• Contract Documents: Because TEPM is the customer of the REP, ABP tenants are not provided the ability to review the Electricity Facts Label, Terms of Service, or Your Rights as a Customer documents, which would constitute a violation of 16 TAC § 25.475(c)(1)(C) had TEPM resold electricity to its tenants.
• Access to Payment Plans: Because TEPM is the REP’s customer, its ABP tenants could not contact the REP to enter into deferred payment plans, levelized payment plans, or payment arrangements to assist in the energy payments as required under 16 TAC §§ 25.480(g) and (h) or during certain months and extreme weather emergencies under 16 TAC § 25.480(j)(2). If TEPM had resold electricity, its tenants would have been entitled to these options.
• Disconnection of Service: Under TEPM’s arrangement, an ABP tenant could potentially be disconnected without rights and notices as provided for under 16 TAC § 25.483(a). If TEPM had resold electricity, its tenants would have been entitled to those rights and notices.
• Notice to Customers Concerning Critical Care Residential Customer and Chronic Condition Residential Customer Status: Under TEPM’s ABP plan, tenants were not notified of their right to apply for important health designations which would ultimately provide disconnection protections. If TEPM had resold electricity under the terms of its ABP lease, its tenants would have been entitled to these protections under 16 TAC § 25.497(d).

DICE said, "TEPM contends that it has never billed any of its tenants for electricity used above the limit specified in the lease and that, in essence, the units offered at its complexes were 'all bills paid' with electricity provided as an incident of tenancy. Apartment owners in Texas are allowed to offer all bill paid rentals as long as electric service is not resold to the tenants but offered as an incident of tenancy. But for the fact that TEPM neglected to follow its own ABP lease policies, TEPM managed to not violate any of the laws or rules identified by the DICE investigation."

DICE said, "DICE takes potential violations of the rules above seriously. While strict adherence to the terms of TEPM’s ABP lease could have resulted in a violation of the rules above, TEPM’s actual practice did not violate the rules, because it furnished electricity as an incident of tenancy without assessing any additional charges over the limit provided in its ABP lease. Furthermore, TEPM has ceased offering the ABP lease option. Accordingly, at this time, DICE is closing Investigation No. 2021100002 without further action. DICE reserves the right to reference and seek the imposition of administrative penalties based on these facts in a future investigation if similar conduct occurs that ultimately constitutes a violation of the law or Commission rules."

Docket 54225

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