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Opinion: Texas PUC Acquisition Rule Can't Override Fixed Price, Change In Term Length Rules

March 16,2022

The following is an opinion piece authored by Paul Ring. While the opinion piece reviews the Texas PUC's substantive rules, it does so from the perspective of a layperson. The following is not a legal analysis and does not constitute legal advice. Paul Ring and in no way allege any potential or actual violation has been committed by Vistra, 4Change, or any related party.

As reported by today, several fixed rate customers have alleged on social media that Value Based Brands LLC, a unit of Vistra doing business as 4Change Energy, is moving such customers to a higher, variable rate as a result of acquiring such customers from Windrose Energy. See specific details in's story

A media representative for Vistra provided the following statement to concerning the matter:

"The Public Utility Commission of Texas’ Rule 25.493(c) specifically addresses the acquisition of customers from another REP (as opposed to customers we enrolled), allowing for material changes to terms of service. Unfortunately, Windrose was left in financial distress by Winter Storm Uri and both companies worked to minimize customer impact. To advance this goal, Vistra provided advance notice to customers of the transition, a product with a competitive market rate, and the ability for these customers to select another product with us or to leave at any time without penalty which we believe was better for the customer than a distressed exit, including a POLR drop."

--- Statement from Vistra

Whether under PUC Subst. R. 25.493(c) or any other provision, does not believe it is clear that a REP acquiring a fixed rate contract customer from another REP can change the customer's rate (or product type), except for those fixed rate changes permitted by PUC rule (and only to the extent the REP reserved the right to make such PUC-authorized changes in the EFL and TOS).

Although there are various scenarios under several provisions of the substantive rules which could ostensibly come into play, starts from the following simple premises (discussion relates to residential customers):

• A fixed rate can only be changed under those conditions outlined in § 25.475, and only to the extent the REP's TOS includes the ability to make any such changes. § 25.475 does not list contract assignments as a condition under which a fixed rate may change.

• A REP cannot change a contract from fixed to variable via a notice of material change. § 25.475 (d) states, "Changes in term (length) of a contract require the customer to enter into a new contract and may not be made by [only] providing the notice described in paragraph (3) of this subsection." By rule, a variable product is month to month, while the term of a fixed product is at least three months, thus any change from fixed to variable is a change in term length. Therefore, even absent any more explicit language, this prohibition on a change in term length prevents a change in product from fixed to variable.

• A customer can only be assigned to another REP if the customer has an existing contract or agreement with the selling REP. If no contract or agreement exists, there's nothing for the new REP to acquire

With these premises, any hypothetical maneuvers that could be used to justify a change from fixed to variable in an acquisition fall apart.

While a REP may have the ability in its TOS to terminate a fixed rate contract, doing so would mean the customer would no longer be a customer of the REP (absent a new agreement to which the customer would have to affirmatively agree)

§ 25.493 does address the acquisition and transfer of customers from one retail electric provider to another.

In reviewing § 25.493, would first note that such rule was last revised in 2007 (it may have been re-adopted on a customary review basis since such time).

§ 25.475, addressing fixed rates, has been updated several times since § 25.493 was last revised, including the most recent § 25.475 revisions just adopted in January 2022. Notably, the term 'fixed rate product' was not defined in the PUC's rules in 2007 when § 25.493 was last revised, nor did the 2007 rule contain specific provisions about what the fixed rate included (recurring charges) and what could and could not change under the fixed rate. It is customary that in cases of conflict, as is arguably the case here, the newer law or rule shall have precedence.

However, even putting aside the issue of recency, nothing in the acquisition rule § 25.493 specifically suggests that an acquiring REP may disregard a fixed rate contract, while, as discussed above, the other substantive rules appear to prohibit such a change.

§ 25.493 does contemplate that the transfer to the acquiring REP may, in some circumstances, materially change the terms of service for the affected customer in an adverse manner, and provides for notice and other requirements for such change.

However, nothing in § 25.493 itself grants authorization for such a material change. Rather, given the lack of such explicit authorization, the rule should be read as merely acknowledging that there are cases where adverse material changes may occur, as governed by the remaining substantive rules, as well as the selling REP's TOS.

§ 25.493 merely states, "If the transfer of a customer will materially change the terms of service for the affected customer in an adverse manner ..." with various requirements then listed

§ 25.493 does not state, "A transfer of a customer may materially change the terms of service for the affected customer in an adverse manner."

Notably, § 25.493 applies generally to all REPs, unlike § 25.475 which applies only to residential and small commercial customers (with § 25.475 including more specific provisions governing fixed rates and any material change in terms). With respect to changes in terms, this was even the case when the 2007 version of each rule were both adopted together (the 2007 § 25.475 still included specific requirements for changes in terms for small customers)

As such, § 25.493 should be viewed as being written broadly to provide a minimum amount of protection for any adverse changes, if otherwise authorized, for all customers, as large customers would otherwise not be required to receive any notice of an adverse change since they do not enjoy the protections of § 25.475 as small customers do.

As an aside, notes that § 25.493 does not use the term assignment, but rather uses terms such as transfer and acquisition. However, even if the market rules were to allow a non-POLR customer transfer outside of a formal assignment (the latter of which requires performance of the existing terms while a "transfer" is more nebulous), REP TOSs typically only provide for an assignment, and thus contract law governing assignment applies regardless of whether the retail market rules are more lax in this respect (the Windrose TOS alleged to apply to one affected customer specifically includes an assignment clause with no reference to any other method of disposing of the contract)

To the extent there is ambiguity in the substantive rules, or their provisions have not been tested (particularly in the time since more robust fixed price provisions have been implemented), would note that multiple PUC Commissioners in the past year have expressed their view, broadly and not specific to the issues discussed above, that fixed means fixed (see story here)

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