PENNSYLVANIA PUBLIC UTILITY COMMISSION [ 52 PA. CODE CH. 62 ] [ L-2011-2266832 ] Licensing Requirements for Natural Gas Suppliers [44 Pa.B. 3551]
[Saturday, June 14, 2014]The Pennsylvania Public Utility Commission (Commission), on August 15, 2013, adopted a final rulemaking order which reviews the Commission's existing regulations outlining the licensing requirements for natural gas suppliers (NGS), specifically whether the exemption from NGS licensing of marketing services consultants and nontraditional marketers should be discontinued and whether all natural gas aggregators, marketers and brokers should be required to be licensed as NGSs to offer natural gas supply services to retail customers.
Executive Summary
By order entered January 13, 2012, the Pennsylvania Public Utility Commission (Commission) initiated a proposed rulemaking to review the exemption from licensing for ''marketing services consultants'' and ''non-traditional marketers'' in its natural gas supply (NGS) licensing regulations at 52 Pa. Code § 62.102 (relating to scope of licensure). The Commission's existing regulations hold a licensed NGS responsible for violations of the law, or for any fraudulent, deceptive or other unlawful marketing or billing acts committed by the marketing services consultant or nontraditional marketer that the NGS hires or with whom it partners.
Following the receipt of comments to its Proposed Rulemaking Order, the Commission suggested further amendments to the NGS licensing regulations in an Advance Notice of Final Rulemaking Order, entered February 28, 2013. The Commission recommended adding the terms ''aggregator,'' ''broker,'' and ''nonselling marketer,'' and incorporated a revised definition of ''nontraditional marketer.'' Ultimately, for purposes of its final rulemaking, the Commission decided to advance proffered definitions of these terms while choosing to eliminate the ''marketing services consultant'' designation. Additionally, the Commission clarified the definition of ''marketing,'' and modified the exemption from licensing requirements set forth in its existing regulations at Section 62.102(a).
By order entered August 15, 2013, the Commission set forth final-form regulations regarding NGS licensing requirements. Pursuant to its Final Rulemaking Order, the Commission determined that (1) all ''aggregators'' and ''brokers'' must be licensed for their involvement in the sale or arrangement of the sale of natural gas to retail customers; (2) ''nonselling marketers'' under contract to a single NGS in Pennsylvania are exempt from licensure; (3) ''nonselling marketers'' under contract to two or more NGS firms in Pennsylvania are required to be licensed; and (4) the licensing exemption continues for ''nontraditional marketers.''
Public Meeting held
August 15, 2013Commissioners Present: Robert F. Powelson, Chairperson; John F. Coleman, Jr., Vice Chairperson; Wayne E. Gardner; James H. Cawley; Pamela A. Witmer, statement follows
Licensing Requirements for Natural Gas Suppliers Regulations at 52 Pa. Code § 62.101—§ 62.102;
L-2011-2266832Final Rulemaking Order By the Commission:
By Order entered February 28, 2013, the Pennsylvania Public Commission (Commission) issued an Advanced Notice of Final Rulemaking (ANOFR) to amend our natural gas supplier (NGS or supplier) licensing regulations at 52 Pa. Code § 62.101 (relating to definitions) and § 62.102 (relating to scope of licensure). Specifically, this rulemaking was initiated to address whether or not to maintain the exemptions from the licensing requirement for marketing services consultants and nontraditional marketers. Comments were filed by various interested parties. The Commission has reviewed those comments, as well as all comments filed to its Proposed Rulemaking Order entered January 13, 2012, and issues this Final Rulemaking.
Background
On June 22, 1999, Governor Thomas J. Ridge signed into law the Natural Gas Choice and Competition Act, effective July 1, 1999, 66 Pa.C.S. §§ 2201—2212 (Act). Pursuant to the Act, beginning on November 1, 1999, retail customers were given the ability to choose an NGS to provide them with natural gas supply services.1
Section 2208(a) of the Act requires that no entity can engage in the business of an NGS unless it holds a license issued by the Commission. 66 Pa.C.S. § 2208(a). The term NGS is defined, in part, as:
An entity other than a natural gas distribution company, but including natural gas distribution company marketing affiliates, which provides natural gas supply services to retail gas customers utilizing the jurisdictional facilities of a natural gas distribution company.
66 Pa.C.S. § 2202. Further, the term ''natural gas supply services'' is defined, in part, as ''the sale or arrangement of the sale of natural gas to retail gas customers,'' 66 Pa.C.S. § 2202.
On June 24, 1999, following the passage of the Act, the Commission issued a Tentative Order establishing a draft licensing application for the interim licensing of NGSs. On July 15, 1999, the Commission issued a Final Order at Docket No. M-00991248F0002 that adopted the interim licensing procedures and license application for NGSs. The Final Order required all suppliers of retail natural gas supply services to obtain an NGS license, other than natural gas local distribution companies providing service within their certificated service territories and municipal utilities providing service within their corporate or municipal limits.
Subsequently, in 2000, the Commission adopted a Proposed Rulemaking Order that revised its interim licensing procedures and promulgated proposed regulations governing the licensing requirements for NGSs. See 52 Pa. Code §§ 62.101—62.114. See Licensing Requirement for Natural Gas Suppliers, Proposed Rulemaking Order, Docket No. L-00000150, 30 Pa.B. 3073 (June 17, 2000). The Commission stated that its initial interpretation of the Act had been that every entity that engages in an activity listed as that undertaken by a natural gas supplier must be licensed. However, the Commission's proposed rulemaking acknowledged that some activities may be undertaken by entities that will not have any direct physical or financial responsibility for the procurement of the customer's natural gas. Accordingly, in the proposed regulations the Commission decided to exempt from licensing two types of entities that worked as brokers or agents for NGSs and retail customers. The proposed regulation used the terms ''marketing services consultant'' and ''nontraditional marketer'' for these agents and brokers.
In the final NGS licensing regulations, the Commission defined the term ''marketing services consultant'' as follows:
A commercial entity, such as a telemarketing firm or auction-type website, or energy consultant, that under contract to a licensee2
or a retail customer, may act as an agent to market natural gas supply services to retail gas customers for the licensee or may act as an agent to recommend the acceptance of offers to provide service to retail customers. A marketing services consultant:(i) does not collect natural gas supply costs directly from retail customers;
(ii) is not responsible for the scheduling of natural gas supplies;
(iii) is not responsible for the payment of the costs of the natural gas to suppliers, producers, or NGDCs.
52 Pa. Code § 62.101 (footnote added).
Additionally, in the regulations the Commission defined ''nontraditional marketer'' as follows:
A community-based organization, civic, fraternal or business association, or common interest group that works with a licensed supplier as an agent to market natural gas supply services to its members or constituents. A nontraditional marketer: (i) conducts its transactions through a licensed NGS; (ii) does not collect revenue directly from retail customers; (iii) does not require its members or constituents to obtain its natural gas service through the nontraditional marketer or a specific licensed NGS; (iv) is not responsible for the scheduling of natural gas supplies; [and] (v) is not responsible for the payment of the costs of the natural gas to its suppliers or producers.''
52 Pa. Code § 62.101.
In Section 62.102 of the regulations, relating to scope of licensure, the Commission created licensing exemptions for marketing services consultants and nontraditional marketers.
(d) A nontraditional marketer is not required to obtain a license. The licensed NGS shall be responsible for violations of 66 Pa.C.S. (relating to the Public Utility Code), and applicable regulations of this title, orders and directives committed by the nontraditional marketer and fraudulent, deceptive or other unlawful marketing or billing acts committed by the nontraditional marketer.
(e) A marketing services consultant is not required to obtain a license. The licensed NGS shall be responsible for violations of 66 Pa.C.S. and applicable regulations of this title, orders and directives committed by the marketing services consultant and fraudulent, deceptive or other unlawful marketing or billing acts committed by the marketing services consultant.
52 Pa. Code § 62.102(d)—(e).
The Commission recommended these two exemptions in its June 2000 Proposed Rulemaking Order. Some commenters supported the exemptions and others, including the Independent Regulatory Review Commission (IRRC), opposed them. In the final rulemaking the Commission determined that marketing services consultants and nontraditional marketers were not engaged in the sale or arranging of natural gas supply services to retail consumers. Thus, they fell outside of the definition of an NGS set forth in Section 2202 of the Act. Furthermore, rather than require these entities to obtain a license themselves, the regulations emphasized that the licensed NGSs were responsible for any violations of the statute, regulations or orders or for any fraudulent, deceptive or other unlawful marketing or billing acts committed by the marketing services consultant or nontraditional marketer. See 52 Pa. Code § 62.102 (relating to scope of licensure). See also 52 Pa. Code § 62.110(a)(3) (NGSs must identify nontraditional marketers and marketing services consultants who are currently or will be acting as agents for the licensee in the upcoming year).
The proposed regulations were finalized by the Commission in July 2001 in Licensing Requirements for Natural Gas Suppliers, Final Rulemaking Order, Docket No. L-00000150, 31 Pa.B. 3943 (July 21, 2001).
On September 28, 2010, Alphabuyer LLC (Alphabuyer) filed a license application to operate as a broker/marketer engaged in the business of supplying natural gas services in the service territory of various NGDCs within the Commonwealth of Pennsylvania. The term broker/marketer is synonymous with marketing services consultant. The application was filed pursuant to section 2208 of the Natural Gas Choice and Competition Act (Act) and Title 52 of the Pennsylvania Code, Chapter 62, Subchapter D. In conjunction with the approval of that application, the Commission noted that during the past ten years, a number of entities similar to Alphabuyer,3 despite the existence of an exemption from the requirement to obtain a license, nonetheless applied for an NGS license in order to supply natural gas services to retail customers.4
Due to the non-compulsory nature of licensing entities like Alphabuyer and the amount of direct interaction these entities have with retail customers, the Commission determined it was time to conduct a review of its regulations outlining the licensing requirements for natural gas suppliers. Therefore, on January 13, 2012, the Commission initiated the instant rulemaking proceeding to determine (1) if its current NGS licensing regulations conform with the plain language of the Natural Gas Choice and Competition Act5 and reflect the current business plans of NGSs appearing before it; and (2) whether continuing these licensing exemptions is in the public interest. Furthermore, the Commission requested comments on whether it was appropriate to remove responsibility from a licensed NGS for violations of the Public Utility Code, and applicable Commission regulations, orders and directives and for fraudulent, deceptive or other unlawful marketing or billing acts committed by a marketing service consultant or a nontraditional marketer.
Accordingly, in its Proposed Rulemaking Order, the Commission suggested the following revisions to its NGS licensing regulations at 52 Pa. Code §§ 62.101—62.110: (1) deletion of the ''marketing service consultant'' and ''nontraditional marketer'' definitions; (2) the deletion of the exemptions set forth in Subsections 62.102(d) and (e) of the regulations and (3) the deletion of Subsection 62.110 (a)(3) that requires a licensee to report the names and addresses of nontraditional marketers and marketing services consultants who are acting or will be acting as agents for the licensee in the upcoming year.
The Commission received comments to its proposed revisions.6 Based upon these comments, the Commission suggested further amendments to the NGS licensing regulations to add the definitions aggregator, broker, and nonselling marketer and to incorporate a revised definition of nontraditional marketer. It also modified the exemption from licensing requirements set forth in the existing regulations and added clarifying language at Section 62.102(a) and to the definition of marketing. The Commission issued its further revisions to the proposed regulations as an Advanced Notice of Final Rulemaking (ANOFR), entered February 28, 2013, and invited additional comments.
Comments to the ANOFR were filed by the Retail Energy Supply Association (RESA), National Energy Marketers Association (NEMA), the Pennsylvania Independent Oil and Gas Association (PIOGA), the Office of Consumer Advocate (OCA), and the Pennsylvania Energy Marketers Coalition (PEMC).
Comments to the Proposed Rulemaking Order
IRRC's Comments
In its comments, IRRC stated that the Commission did not provide convincing supporting information as to the need to amend the regulations regarding licensing of NGSs. IRRC Comments at 2. IRRC commented that the Commission's Regulatory Analysis Form (RAF) did not provide substantive information to estimate the direct and indirect costs to the Commonwealth, to its political subdivisions and to the private sector, and did not identify the types of persons, businesses and organizations which would be affected by the regulation. IRRC further stated that the Commission should explain its interpretation of its statutory authority in deciding which entities must be licensed, which entities do not need to be licensed and provide an explanation of how the final-form regulation meets the requirement of the Act. Id. IRRC recommended that the Commission withdraw this proposed regulation and conduct an investigation with stakeholders to determine who is using the current exemption, what the cost impact is to them and how to best regulate the competitive marketplace. Id. In the alternative, IRRC recommended that the Commission publish an advanced notice of final rulemaking that allows interested parties the opportunity to review the revised regulatory language before submittal of a final-form regulation. Id.
NEMA's Comments
NEMA stated that a wholesale deletion of the ''marketing services consultant'' definition and its exemption from licensing is not necessary for those consultants that only make sales to consumers on behalf of licensed suppliers. NEMA Comments at 7. NEMA stated, however, that ''energy consultants,'' who purport to hold themselves out as either agents of or representatives of consumers and which have been included as a subset within the definition of 'marketing services consultants' by the Commission, may not have sufficient safeguards in place within the current regulations to protect consumers and the public interest. NEMA Comments at 9-12.
NEMA stated that there has been a proliferation of 'energy consultants' in the competitive marketplace that interject themselves between the consumer and the NGS in order to ''arrange for the sale of natural gas'' for the consumer. Id. NEMA explained that these energy consultants may have a direct contract with the consumer to perform this service on the consumer's behalf. In the alternative, the energy consultant may not have a contract with the consumer, but will gather bids from multiple suppliers for the consumer and receive its compensation through the NGS's bill. In this latter scenario, the energy consultant has an agreement in place with the winning NGS for the NGS to act as its billing service provider and the NGS is under a contractual obligation to remit compensation or commission directly to the energy consultant.
NEMA stated that an NGS should not be responsible for the energy consultant's conduct because it is operating as the agent of the consumer and not the supplier. NEMA Comments at 12. NEMA stated that the Commission should look to whom the entity owes its fidelity or whether they are acting for their own account rather than a specific supplier or a purchaser or group of purchasers. NEMA asserted that in the absence of a contractual relationship with the NGS, the NGS should not be responsible for the entity's conduct. Id.
NEMA stated that it supports the exemption from licensing of entities operating exclusively for a supplier in a utility service territory and the licensing of brokers who are not beholden to anyone unless they have an exclusive contract with one supplier. NEMA Comments at 15. NEMA asserted that refining the current exemption by excluding 'energy consultants' from the ''marketing services consultant'' definition may be a good first step in an ongoing process of monitoring the performance of entities in the natural gas market. Conversely, NEMA stated that the Commission should retain the exemption from the licensing requirements for nontraditional marketers. NEMA asserted that the nontraditional marketer is not involved in the financial transaction between the licensed supplier and the customer and is not holding itself out as representing the NGS, it is merely communicating to its members that there is an offer that they may avail themselves of from the NGS.
Furthermore, NEMA stated that prior to the Commission making a determination as to whether gas aggregators, brokers or marketers need to be licensed, that the Commission should engage in a rulemaking process to develop definitions and a common understanding of these terms as they apply to the retail gas market. Id. NEMA noted that legislature did not set forth definitions for the terms ''aggregator,'' ''broker,'' and ''marketer'' in the Act or any corresponding licensing requirement for any such specifically identified entities. NEMA asserted that the licensing requirement in the Act mentions only ''natural gas suppliers.''
WGES's Comments
In its comments, WGES stated that it agreed with NEMA that the Commission should consider refining the expansive definition of ''marketing services consultant'' to exclude ''energy consultants'' that ''arrange for the sale of natural gas for a consumer.'' WGES Comments at 1. WGES explained that under this scenario, the main contractual relationship exists between the energy consultant and the customer.
WGES further stated that NGSs generally do not exercise any control over the actions of energy consultants. WGES Comments at 2. Nevertheless, despite this lack of control or contractual relationship, under the current regulations, NGSs may be held responsible for the actions of the energy consultant. WGES stated that the Commission should revise its regulations to assign appropriate responsibility to energy consultants for their actions, rather than assigning responsibility to NGSs. WGES Comments at 3.
Spark Energy's Comments
Spark Energy stated that NGS firms and marketing entities should not be grouped together when identifying licensing requirements. Spark Energy Comments at 2. Rather, Spark Energy stated that the Commission should implement a less-stringent certification procedure for marketing entities. Id. Spark Energy explained that the newly-implemented certification process will allow the Commission to focus on whether the marketing entity possesses appropriate core marketing proficiencies. Additionally, Spark Energy stated that certification should enhance, but not replace, oversight of the entity by the licensed NGS for fraudulent, deceptive or unlawful practices. Spark Energy Comments at 3. Lastly, Spark Energy stated that if the definitions for ''marketers'' and ''brokers'' were adopted for gas purposes, it would be difficult to distinguish them from the existing marketing services consultant and nontraditional marketers operating today in the competitive retail market. Accordingly, Spark Energy stated that the Commission should refrain from adopting the more generic ''marketer'' and ''broker'' terms. Spark Energy Comments at 5-6.
RESA's Comments
RESA stated the Commission should retain the current ''marketing services consultant'' and ''nontraditional marketer'' definitions in the regulations. RESA Comments at 2. However, RESA also stated that the Commission should incorporate the ''aggregator,'' ''broker'' and ''marketer'' definitions so there is symmetry and continuity between the treatment of licensed entities on the electric side with the entities subject to the natural gas licensure regime. RESA Comments at 3-4. RESA stated that the exemption from licensure should continue for those marketing services consultants and nontraditional marketers that are compensated and conducting marketing and sales activities on behalf of a single licensed NGS. RESA Comments at 4. To the extent that the marketing services consultant or nontraditional marketer works solely for a single NGS, it would be deemed an ''agent'' of the NGS and, therefore, would not be required to be separately licensed with the Commission. RESA Comments at 4-5.
RESA further stated that those marketing services consultants or nontraditional marketers who function as aggregators or a broker/marketer by providing or arranging for natural gas service to be supplied to an end-user, including but not limited to collection of payment, schedule of natural gas supplies, or payment of natural gas supplies should be required to be licensed with the Commission. RESA Comments at 5. RESA stated that while these entities are not ''agents'' of an NGS, they directly arrange for a customer's natural gas supply services; therefore, these natural gas aggregators and broker/marketers should go through the licensing process and have their marketing activities directly regulated by the Commission. Id.
However, RESA asserted that it is in favor of less burdensome licensing requirements for these entities in the form of reduced bonding or security requirements. Id. Furthermore, RESA asserted that these entities should not be required to submit annual reports given that NGSs already have an obligation to submit annual reports and are parties that are best positioned to provide the required data to the Commission due to their familiarity with the process for confidential filings. RESA Comments at 6.
PEMC's Comments
PEMC stated that there does not appear to be a discernible or identifiable reason for the Commission to revise the current regulations. PEMC Comments at 4. Additionally, PEMC stated that as an unintended consequence, the Commission's proposed revisions would dramatically expand the number of license applications it must review and suppliers it must monitor. Id. Accordingly, PEMC stated that it opposes the elimination of the exemption from licensing requirements for marketing services consultants and nontraditional marketers.
PEMC offered two alternatives to the Commission. First, PEMC stated that when agents who are legitimate representatives of a single supplier are found to be in violation of Commission regulations, the NGS should be held accountable as if the agent was its own employee. PEMC Comments at 5. Secondly, PEMC stated that to address accountability issues that can arise when an agent simultaneously represents more than one NGS, the Commission could choose to define such agents as ''natural gas supply brokers.'' Id. PEMC further stated that the Commission could then either require entities that meet this definition to apply for a standard NGS license or establish a new, separate natural gas broker license tantamount to the ''broker'' definition under the EGS licensing regulations. Id.
Discussion of comments to the Proposed Rulemaking Order
In response to IRRC's comments that the Commission did not provide convincing supporting information as to the need to amend its existing regulations regarding licensure of NGSs, the Commission published an advanced notice of final rulemaking to allow the public and standing committees the opportunity to review the revised regulatory language before submittal of a final form regulation. The Commission's statutory authority to decide which entities must be licensed comes from 66 Pa.C.S. § 2202 (regarding definitions for the terms ''Natural Gas Supplier'' and ''natural gas supply services''); and § 2208(a) (stating that no entity shall engage in the business of a natural gas supplier unless it holds a license issued by the commission). Also, the Commission acknowledges IRRC's comments regarding the deficiencies of its RAF submitted with the Proposed Rulemaking. The Commission will supplement its RAF to address the direct and indirect costs that will result from changes to our regulation and will identify the various types of persons, businesses and organizations that may be affected.
In establishing the original NGS licensing regulations, the Commission adopted definitions for both ''marketing services consultant'' and ''nontraditional marketer'' as a means to distinguish certain activities that would fall outside of the definition of ''natural gas supply services'' set forth in Section 2202 of the Act. Thus, when the Commission defined these two entities, it clearly determined that there was a distinction between the rendering and sale of the physical natural gas commodity versus the provision of marketing and sales support activities. The Commission supported the exemptions because ''those [marketing] entities . . . act[ed], not on behalf of licensees, but on behalf of retail customers as energy consultants.'' April 19, 2001 Order at 10.
However, upon its subsequent experience of monitoring the activities and interactions of entities acting or operating as ''marketing services consultants'' in the gas retail market, the Commission believes these entities appear to provide functions that are the same or similar to those performed by ''aggregators'' and ''brokers'' operating on the electric competition side, whom are required to be obtain a license. Therefore, the Commission determined that it was appropriate to revisit the definitions of those entities operating within the competitive retail gas market.
We acknowledged that the Act did not create subcategories of natural gas suppliers as were created for electric generation suppliers in the Electric Competition Customer Choice and Competition Act. See 66 Pa.C.S § 2803 (definitions of aggregator, market aggregator, broker, marketer and electric generation supplier). However, we determined that entities that act as aggregators and brokers do fall under the definition of NGS as they are in engaged in the ''arrangement of the sale of natural gas to retail gas customers.'' 66 Pa.C.S. § 2202. The fact that these entities may take no title to the natural gas is irrelevant in this determination.
Therefore, the Commission deleted the term ''marketing services consultant'' set forth in the initial licensing regulations as its definition was ambiguous and the activities of these entities had become synonymous with the activities of ''aggregators'' and ''brokers'' on the electric competition side. The Commission determined that the activities of ''aggregators'' and ''brokers'' on the natural gas side should be regulated under the Natural Gas Choice and Competition Act. In response to IRRC's comment about the Commission's authority to decide which entities must be licensed, the Commission added definitions for ''aggregators'' and ''brokers'' involved in the sale, arrangement and purchase of natural gas to retail customers to the final-form regulation. See 66 Pa.C.S. § 2202. Additionally, the Commission amended its definition of a ''nontraditional marketer'' to ensure these entities engage only in the marketing of an NGS's natural gas service to its members or constituents. However, the Commission also decided to add the term ''nonselling marketer'' to identify entities engaged only in marketing natural gas services to retail customers on behalf of a NGS. These ''nonselling marketers'' are not required to obtain a license unless they are under contract to more than one NGS. The Commission believes this provides sufficient consumer protection, but will not infringe on the competitive market.
Thus, for the purpose of the amendments to our regulation at 52 Pa. Code §§ 62.101—62.102, the definitions of ''aggregators'' and ''brokers'' in this final-form rulemaking refer to entities engaged in ''the sale or arrangement of the sale of natural gas to retail gas customers'' under 66 Pa.C.S. § 2202. Entities engaged solely in the marketing of natural gas to retail customers do not provide natural gas supply services as defined in Section 2202 of the Public Utility Code.
In response to IRRC's comment about proving a threat to the public interest, comments received from the regulated community are instructive. The natural gas marketplace has seen a proliferation of ''energy consultants'' that interject themselves between the consumers and NGSs. These consultants currently operate as ''marketing services consultants'' and are outside the scope of our licensing requirements. However, ''energy consultants'' arrange for the sale of natural gas for the consumer and act as either agents or representatives of consumers. Presently, ''energy consultants'' may have a direct contract with the consumers, but they also may gather bids from multiple suppliers for the consumer and receive compensation through the NGS's bill. Thus, safeguards need to be in place to protect consumers and to ensure that ''energy consultants'' disclose their fees and are accountable for their analysis of a customer's natural gas needs. ''Energy consultant'' activities fall within the definition of ''broker.'' Therefore, entities that provide energy consultation services for customers should be required to obtain a license from the Commission regardless of whether or not they take title to the natural gas.
Further, the Commission noted RESA's comments stating that there should be some form of symmetry and continuity between our governance of the licensed entities performing electric supply services on the electric side with entities operating within the natural gas licensure regime, especially when they appear to be undertaking the same or similar functions. Accordingly, we revised Section 62.101 of our regulations by deleting the definition of ''marketing services consultant'' and incorporating the definitions for ''aggregator'' and ''broker'' set forth in the our EGS licensing regulations at 52 Pa. Code § 54.31.
PEMC commented that the Commission's proposed revision to eliminate the current exemptions would dramatically expand the number of applicants the Commission must review and suppliers it must monitor. Additionally, Spark Energy commented that the existing def- initions of marketing service consultant and nontraditional marketer were useful in describing which marketing entities would be subject to the Commission licensing requirements. Moreover, Spark Energy asserted that licensed NGSs and entities that perform only marketing duties should not be grouped together when identifying licensing requirements.
In its ANOFR, the Commission identified the primary focus of this rulemaking as whether entities essentially acting as aggregators, brokers or entities solely providing marketing services in the natural gas retail marketplace should be licensed under the Act. In order to bring clarity to the natural gas retail marketplace regarding the entities that must be licensed, as we stated above, we proposed the deletion of the current ''marketing services consultant'' definition and incorporated the terms ''aggregator,'' ''broker'' and ''nonselling marketer'' into the final-form regulation.
Our rationale for the licensure of natural gas ''aggregators'' and natural gas ''brokers'' has been fully discussed above. A ''nonselling marketer'' is an entity whose activities are limited to providing only marketing support services on behalf of one or more NGS firms. We noted the comments of RESA and NEMA that a ''marketer'' that operates under an exclusive contract with a single licensed NGS supplier to conduct natural gas-related marketing activities in its service territory should not be required to be separately licensed by the Commission. We agreed with the commenters that the line of accountability back to a single NGS is clear where there is a direct relationship and the NGS will be directly responsible for the marketer's activities and for reporting requirements under Section 62.110. Accordingly, we incorporated this concept into the ANOFR by stating that a ''nonselling marketer'' under contract to a single NGS will not be required to obtain a license. Conversely, a nonselling marketer that interacts directly with an end-user customer or simultaneously represents more than one licensed NGS should be required to obtain a license so that if an action is brought by a customer or the Commission for violations of the Code, applicable regulations, Commission orders or other consumer protection safeguards, the appropriate party is clearly identifiable.
As to ''nontraditional marketers,'' we reinstated a modified definition for this term and exempted these entities from a licensing requirement. Nontraditional marketers are community-based organizations, civic, fraternal or other groups with a common interest that work with a licensed NGS to endorse that NGS' natural gas supply service to its members. The members are not required to purchase the services from the endorsed NGS and, if the offer is accepted, the contract is between the member and the NGS. Under these circumstances, we believed it reasonable to not require a license for this type of activity.
Based upon our further consideration of these issues, the Commission proposed that an exemption from licensing for entities providing ''marketing'' support services either (a) on behalf of the members of a civic or other community-based organization or (b) on behalf of a single NGS should remain intact. Thus, in contradiction to PEMC's assertion, the Commission has retained some form of the previous exemption from licensing set forth in the existing regulations in the revised final-form regulation.
Spark Energy was also concerned that entities that perform only marketing duties but fall outside of the licensing exemption category, should not have to pay a license application fee. However, we noted that marketers/brokers and aggregators providing electric generation supply services have been required to pay a de minimus application fee that we are now requiring marketing entities on the natural gas side to pay. Such a de minimus fee has not had a negative impact, or chilling effect, on entities seeking to provide electric generation supply services and, therefore, is not expected to have a negative effect on entities seeking to participate in the natural gas retail market in order to conduct marketing support services.
Comments to the Advanced Notice of Final Rulemaking Order
RESA's Comments
In general, RESA supports the revisions recommended in the Commission's ANOFR. As an example, RESA agrees with the Commission that the licensing exemption for nontraditional marketers should be retained. However, RESA contends that the licensing exemption applicable to nonselling marketers who work for a single NGS should be clarified to state that the exemption attaches to marketers who work for no more than a single NGS in a given service territory. RESA suggests that a nonselling marketer who works for a single NGS that is licensed to provide service in a specific service territory should be permitted to work for another NGS that is licensed to provide service in a completely separate service territory without first obtaining a license. RESA believes that its proposed revision provides for necessary consumer protections while also supporting and promoting natural gas competition in Pennsylvania.
NEMA's Comments
NEMA, like RESA above, supports the exemption from licensing of nonselling marketers operating exclusively for one NGS in a single utility service territory. NEMA states that an NGS should be responsible for the actions of third parties with whom they have entered into contractual relationships and who act exclusively in the NGS's interest in a single utility service territory. NEMA identifies that the Commission's suggested language in its ANOFR at Section 62.102(f) state that, ''a nonselling marketer under contract to only one licensed NGS may not be required to obtain a license.'' (Emphasis added). However, the text of the Commission's ANOFR order concluded that a nonselling marketer will not be required to obtain a license. (Emphasis added). NEMA requests that the language in Section 62.102(f) be modified to reflect the Commission's finding in the ANOFR order.
NEMA also recommends that licensing or registration requirements placed on aggregators, brokers and non-exclusive, nonselling marketers be imposed only after a showing of demonstrable need to safeguard the public has been made. In its comments, NEMA contends that if the Commission advances a uniform licensing requirement for aggregators, brokers and non-exclusive, nonselling marketers, then the licensure process for different entities in the retail marketplace should be tailored to the activities they perform and the relative financial fitness and technical expertise that are required to perform their different roles. For example, NEMA suggests that license or registration applications for nonselling marketers might require information relevant to the entity's ability to perform sales and marketing support services as opposed to the retail sale of the natural gas commodity, which is how the current licensing application is framed. Moreover, NEMA recommends information the Commission might consider collecting from these different entities including: (1) a list of officers and key management personnel; (2) contact information including the entity's principal place of business as well as a local service agent; (3) an entity's express agreement to abide by relevant Commission rules and regulations; (4) the demonstration of the requisite technical and operational experience to conduct its business; and (5) a listing of other states in which the entity currently does business.
Additionally, NEMA shares concern that the Commission should consider a form of minimal registration of individuals engaged in sales and marketing activities to residential consumers, other than NGS employees, exclusive agents, brokers and Multi-Level Marketing representatives. NEMA states that this could be as straightforward as requiring these individuals to file their names and contact information with the Commission to produce an identification number that would be presented to residential consumers during direct sales or marketing activities.
NEMA recommends that the Commission's suggested definition of the term ''broker'' that was added in its ANOFR be revised to reflect common industry usage by clarifying that the broker is acting ''on behalf of'' NGSs when it is performing its service. Also, NEMA once again suggests a definition for ''energy consultants'' that act on behalf of consumers in the marketplace because these consultants may have direct contact with the consumer to arrange for the sale of natural gas on the consumer's behalf. One particular concern raised by NEMA to the treatment of ''energy consultants'' is the disclosure of their fee to consumers.
Furthermore, NEMA contends that the title ''nonselling marketer'' may not correctly identify the types of activities that such entities undertake and could be better expressed in a manner more consistent with industry usage and understanding. NEMA suggests that these entities instead be denominated as ''marketing services providers'' or ''sales channel partners.'' Finally, NEMA supports the exemption from licensing of nontraditional marketers.
PIOGA's Comments
In its comments, PIOGA echoes the general thrust of the comments of NEMA. Specifically, PIOGA supports (1) NEMA's suggested definition of ''energy consultant;'' (2) NEMA's suggested change of the term ''nonselling marketer'' to ''marketing services provider;'' (3) NEMA's suggested revision to the term ''broker;'' and (4) the correction of the language in proposed Section 62.102(f) to implement the Commission's finding in the ANOFR that nonselling marketers operating exclusively for one NGS need not be licensed. However, in contrast to NEMA's recommendations, PIOGA suggests that nonselling marketers with an exclusive marketing relationship to an NGS that operates in more than one utility service area should be licensed. PIOGA contends that this situation is present in western PA where gas utility service territories overlap.
OCA's Comments
The OCA submitted comments in support of the Commission's proposed modifications to its licensing requirements for NGSs. The OCA cited the significance of the proposed changes as ''broker/marketers'' have taken up an increasingly significant role in the retail gas market. Also, the OCA supported the Commission's determination to not require a license for nontraditional marketers because the members of these groups are not required to purchase the services from any partnering NGS.
PEMC's Comments
PEMC, in its comments, supports the Commission's decision to incorporate the definitions of ''broker'' and ''aggregator'' from the electric supplier licensing regulations into the natural gas regulations. Additionally, PEMC favors the Commission's decision to leave intact the licensing exemption for ''nonselling marketers'' that provide marketing and sales support services on behalf of only one NGS because the alternative would result in significant costs for NGSs who rely on services from a range of partner firms to sell and deliver natural gas to retail consumers. PEMC recognizes that requiring licensing for nonselling marketers that work with multiple NGSs ensures a single entity can be held responsible for any violations of consumer protection or sales and marketing rules. Finally, PEMC supports the Commission's choice to continue the licensing exemption for nontraditional marketers which work on behalf of the members of a civic or other community-based organization.
Discussion of the comments to the Advanced Notice of Final Rulemaking
As stated in the Commission's ANOFR, entered February 28, 2013, at Docket No. L-2011-2266832, the focus of this rulemaking is to review: (1) whether the exemption from licensing for marketing services consultants and nontraditional marketers should be discontinued; and (2) whether all natural gas aggregators, marketers and brokers should be required to be licensed as NGSs in order to offer natural gas supply services to retail consumers.
RESA and NEMA, in their respective comments, request that the licensing exemption applicable to nonselling marketers working for a single NGS and set forth in the Commission's ANOFR should be clarified to state that the exemption applies to nonselling marketers who work for only one NGS in a single utility service territory. In part, this request was in response to the Commission's ANOFR wherein we noted comments that a ''marketer'' operating under an exclusive contract with a single licensed NGS to conduct natural gas-related marketing and sales activities in its service territory should not be required to be separately licensed by the Commission. (Emphasis added.) See ANOFR p. 15. The Commission agreed with commenters that when a nonselling marketer's line of accountability back to a single NGS is clear, meaning that a direct relationship exists and the NGS is directly responsible for the marketer's activities and for its reporting requirements under Section 62.110, a nonselling marketer under contract to a single NGS will not be required to obtain a license.
However, the Commission will not expand its licensing exemption at this time. First, the Commission recognizes that there are places in the Commonwealth, especially in western PA, where gas utility service territories overlap. To the extent that the proposals by RESA and NEMA would expand the licensing exemption for a ''nonselling marketer'' with an exclusive marketing relationship with only one NGS to an exemption that applies to a ''nonselling marketer'' that contracts with an NGS that operates in more than one utility service territory, no direct relationship or responsibility may be inferred in the event of abuse. Secondly, in forwarding administrative and regulatory efficiency, the rule proffered in the Commission's ANOFR is enforceable as both NGDCs and NGSs continue to expand the territories they service as natural gas competition continues to grow. Finally, the Commission believes that consumer protections are further enhanced by requiring ''nonselling marketers'' working for more than one NGS to be licensed, even when the NGSs operate in separate service territories.
The Commission will grant NEMA's request to have the language in the proffered revision of 62.102(f) modified to reflect the Commission's finding in its ANOFR. Thus, the language will state that a nonselling marketer is not required to obtain a license unless it is under contract to more than one licensed NGS.
In response to NEMA's recommendation that licensing or registration requirements be imposed on aggregators, brokers and non-exclusive, nonselling marketers only after a showing of demonstrable need to safeguard the public has been made, the Commission declines to delay in regulating these entities. First, the Act mandates that aggregators and brokers, because they are involved in the sale or the arrangement of the sale of natural gas to retail customers, must be licensed. We believe that entities interacting with retail consumers should have the appropriate regulatory oversight in the first instance, not after a violation or harm to the public has already occurred. Secondly, with respect to non-exclusive, nonselling marketers, we have determined it is the relationships with multiple NGSs that require these entities to obtain a license. The Commission seeks to ensure that a party against whom an action may be brought is clearly identifiable where waste, fraud and abuse occurs. Neither a delay in regulating these entities nor a light-handed approach to licensing or registration adequately safeguards the public.
NEMA also comments that if the Commission moves forward with its proposal to uniformly license aggregators, brokers and non-exclusive, nonselling marketers, then the licensure process should be tailored to the activities these entities perform and the relative financial fitness and technical expertise required in completing their different tasks. We agree with this suggestion in part. We note that pursuant Section 2208 of the Act and Section 62.111 of our regulations, which identify the licensing requirements for entities that sell or arrange for the sale of natural gas to retail gas customers, potential licensees have to pay an application fee and furnish a bond or other security. Based upon the activities that nonselling marketers perform, we will not establish a bonding requirement for non-selling marketers, as they do not provide natural gas supply service as defined in section 2202 of the Act. We do not believe that it is necessary for entities that provide only marketing services in the natural gas retail marketplace to furnish a bond in order to obtain a license from the Commission. The only cost that would potentially apply to nonselling marketers is the de minimus license application fee.
In its comments, NEMA requests that the Commission consider a form of minimal registration of individuals engaged in marketing activities to residential consumers. The Commission's suggested definition of a nonselling marketer currently refers only to a commercial entity, but makes no mention of an individual engaged in similar activities. Therefore, the Commission will take this opportunity to expand its definition of nonselling marketers to include individuals engaged in marketing activities to residential consumers. If these individuals are under contract to more than one NGS, like their commercial entity counterparts, they will be required to obtain a license. While it is true that licensing these individuals will entail some cost for the license application fee, we note that the amounts are de minimus and are not expected to have a negative impact on the natural gas supply market. Moreover, in the Commission's judgment, the cost associated with obtaining a license are outweighed by the benefit to the public of ensuring that these marketing activities are performed by credible and responsible entities.
Additionally, for the purpose of clarification, the Commission will further amend its definition of ''nonselling marketer'' to state that an individual or commercial entity must be under contract to a licensed NGS to provide marketing services to retail customers for natural gas supply services. Moreover, in its ANOFR, the Commission added language to Section 62.102(e) stating ''or which has a contract with an end-user retail natural gas customer.'' This clause will not be retained in the Commission's Final Rulemaking because there is no foreseeable circumstance in which a marketer would work on behalf of a retail consumer rather than an NGS.
Finally, NEMA comments that the title ''nonselling marketer'' may not correctly identify the types of activities that such entities undertake. Instead, NEMA suggests these entities be called either ''marketing services providers'' or ''sales channel partners.'' The Commission chooses not to adopt either of these titles which NEMA believes will better reflect industry usage and understanding. Neither suggestion properly encompasses that the key to an individual or commercial entity receiving the licensing exemption is that a marketer solely offers marketing services on behalf of the NGS and does not offer to ''arrange for the sale of'' natural gas supply services to retail consumers. While marketers may hand-out and introduce an NGS's services to the consumer, the consumer must contact the NGS directly to be provided with service or enter into a separate contractual relationship with a broker or an aggregator. Therefore, the Commission believes that the term ''nonselling marketer'' most accurately describes and covers the intent of the definition.
The Commission will also retain its amended definition of the term ''nontraditional marketer'' as proffered in its ANOFR and the exemption from licensing for these entities. The comments received to the Commission's ANOFR supported the continuation of this exemption.
Additionally, with respect to the Commission's regulation at 52 Pa. Code § 62.110(a)(3) (regarding reporting requirements and requiring a licensed NGS to file the names and addresses of nontraditional marketers and marketing services consultants acting as agents for the licensee), our Proposed Rulemaking Order suggested the deletion of this requirement. Logically, removing this requirement followed our recommendation, at the time, to delete the definitions of ''nontraditional marketers'' and ''marketing services consultants'' and to eliminate licensing exemptions entirely. However, as our ANOFR and now our Final Rulemaking Order reflect, a revised definition of ''nontraditional marketers'' and a new designation, ''nonselling marketers,'' make certain marketing entities exempt from licensing. Thus, our Final Rulemaking Order will reinstate an amended Section 62.110(a)(3) to account for these entities and that will require licensed NGSs to file the names and addresses of their agents as part of their annual reports to the Commission.
Both NEMA and PIOGA commented that a separate definition of ''energy consultant'' should be included in the Commission's revised regulations to complement the advanced definition of ''broker.'' These ''energy consultants'' work on behalf of consumers as intermediaries between the consumer and an NGS for the sale and purchase of natural gas. While we acknowledge the latitude that is available to the Commission to separately delineate a definition of ''energy consultant,'' entities that provide energy consultation services for consumers under our final form regulations will already be required to obtain a license from the Commission because their activities fall within the definition of ''broker.'' Implicit in our definition of the term ''broker'' is the understanding that an entity acting as an agent or intermediary in the sale and purchase of natural gas, whether working on behalf of the retail consumer or the NGS, must be licensed. As Section 62.102(a) of our regulations state, in pertinent part, ''an NGS, including an aggregator or a broker, may not . . . offer to provide, or provide natural gas supply services to retail consumers until it is granted a license by the Commission.'' Therefore, we decline to construct a separate definition for ''brokers'' working on behalf of consumers and reaffirm that all entities that act as agents or intermediaries in the sale and purchase of natural gas must be licensed.
In reaching the conclusion directly above, the Commission also rejects NEMA's recommendation to revise the suggested definition of the term ''broker.'' In its comments, NEMA requests that the definition of ''broker'' read as follows:
Broker—An entity, licensed by the Commission, that acts on behalf of more than one NGS as an agent or intermediary in the sale and purchase of natural gas but does not take title to natural gas supply. (Additions in bold.)
This proffered addition would provide an exemption for licensure for entities providing brokering services for only one NGS and does not truly delineate the Commission's intent regarding the licensing of brokers. Currently, our regulations require that an NGS obtain a license before offering to provide or before providing natural gas supply services to retail consumers. See 52 Pa. Code § 62.102(a). This steadfast rule has been applied to all entities that provide natural gas supply services irrespective of whether the entity acts on behalf of more than one NGS. If an entity is not solely engaged in marketing services to retail consumers on behalf of a licensed NGS, but also in the provision of natural gas supply services, that entity must obtain a license.
Conclusion
This order sets forth final-form regulations concerning NGS licensing that eliminate the definition of marketing service consultants and modify the exemption from licensing requirements set forth in the current regulations. Consistent with our authority and obligations under the Act, particularly, Chapter 22 of the Public Utility Code (66 Pa.C.S. §§ 2201—2212), the Commission is establishing rules and regulations that will bring the benefits of natural gas competition and customer choice to retail consumers. The purpose of the regulations is to eliminate barriers to supplier entry and participation in the marketplace. Accordingly, under sections 501 and 1501 of the Public Utility Code (66 Pa.C.S. §§ 501 and 1501); sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations promulgated thereunder, 1 Pa. Code §§ 7.1, 7.2 and 7.5; section 204(b) of the Commonwealth Attorneys Act (71 P. S. § 732.204(b)); section 745.5 of the Regulatory Review Act (71 P. S. § 745.5); and section 612 of The Administrative Code of 1929 (71 P. S. § 232), and the regulations promulgated thereunder at 4 Pa. Code §§ 7.231—7.235, we find that the regulations for establishing a licensing requirements for NGSs as set forth in Annex A should be approved; Therefore,
It Is Ordered That:
1. The Secretary shall serve a copy of this order and Annex A on all jurisdictional natural gas distribution companies, natural gas suppliers, the Office of Consumer Advocate, the Office of Small Business Advocate and all other parties that filed comments at Docket No. L-2008-2069114, Natural Gas Distribution Companies and the Promotion of Competitive Retail Markets.
2. The Secretary shall certify this order and Annex A and deposit them with the Legislative Bureau for publication in the Pennsylvania Bulletin.
3. The Secretary shall submit this order and Annex A to the Office of Attorney General for approval as to legality.
4. The Secretary shall submit this order and Annex A to the Governor's Budget Office for review of fiscal impact.
5. The Secretary shall submit this order and Annex A for review by the designated standing committees of both houses of the General Assembly, and for review and approval by the Independent Regulatory Review Commission.
6. The final regulations become effective upon publication in the Pennsylvania Bulletin.
7. The Office of Competitive Market Oversight shall electronically send a copy of this Order and Annex A on all persons on the contact list for the Stakeholders Exploring Avenues to Remove Competitive Hurdles (SEARCH).
8. A copy of this Order and Annex A shall be posted on the Commission's website at the Office of Competitive Market Oversight's web page.
9. The contact persons for this Final Rulemaking are David E. Screven, Assistant Counsel, (717) 787-2126 (legal), Colin W. Scott, Assistant Counsel, (717) 783-5949 (legal) and Brent Killian, Bureau of Technical Utility Services, (717) 783-0350 (technical). Alternate formats of this document are available to persons with disabilities and may be obtained by contacting Sherri DelBiondo, Regulatory Review Assistant, Law Bureau, (717) 772-4597.
Statement of Commissioner Pamela A. Witmer Before the Commission today is the Final Rulemaking Order concerning revisions to the Commission's requirements for Natural Gas Supplier (NGS) licensing that, among other things, removes the exemption for marketing services consultants, establishes new definitions and clarifies the NGS licensing requirements for ''aggregators'' and ''brokers.'' These changes better reflect the statute as well as current business standards and practices. Importantly, these changes also provide better symmetry and continuity between the treatment of licensed entities on the electric side with entities subject to our NGS licensing requirements, both of which are providing the same service to the competitive market.
As I stated in October 2011 when the Commission first initiated this rulemaking process, ''I believe it is necessary for the Commission to periodically review both the Public Utility Code and our regulations to ensure that their purpose is being properly effectuated.'' I continue to believe that it is appropriate to periodically review statutory requirements, regulations, and policy statements to ensure that all are in synch, are being properly effectuated and reflect current standards.
I want to commend the good work of staff as well as the thoughtful comments received that resulted in today's Final Rulemaking Order. This rulemaking recognizes the important role aggregators and brokers have come to play in the natural gas competitive retail market and provides more clarity to the natural gas industry and more transparency to consumers regarding what is expected of these entities. Furthermore, using similar terminology across the electric and natural gas industries will reduce customer confusion and will allow companies that supply or sell both commodities to more easily market their products across the Commonwealth.
I remain steadfast in my belief that a functioning natural gas competitive retail market represents an economic opportunity and that this Commission should continue to actively explore ways to remove barriers to retail natural gas competition. I look forward to working with all interested parties going forward to further strengthen the state of natural gas competition in Pennsylvania.
PAMELA A. WITMER,
CommissionerPublic Meeting held
November 14, 2013Commissioners Present: Robert F. Powelson, Chairperson; John F. Coleman, Jr., Vice Chairperson; James H. Cawley; Pamela A. Witmer; Gladys M. Brown
Petition for Reconsideration of the Commission's Rulemaking regarding Licensing Requirements
for Natural Gas Suppliers Regulations at
52 Pa. Code § 62.101—§ 62.102;
L-2011-2266832Order By the Commission:
Before the Commission for consideration and disposition is a Petition for Clarification and/or Reconsideration (Petition) filed by Washington Gas Energy Services (Washington Gas) on August 30, 2013, in the above-captioned proceeding. The Petition refers to the Commission's Final Rulemaking Order that was issued on August 15, 2013 (August 15th Final Rulemaking Order), which set forth final form regulations regarding the scope of the licensure of Natural Gas Suppliers. No Response to the Petition has been filed. For the reasons set forth herein, we will grant the Petition and will modify the August 15th Final Rulemaking Order by revising the definition of nontraditional marketers set forth in our final regulations.
Background
On June 22, 1999, Governor Thomas J. Ridge signed into law the Natural Gas Choice and Competition Act, effective July 1, 1999, 66 Pa.C.S. §§ 2201—2212 (Act). Pursuant to the Act, beginning on November 1, 1999, retail customers were given the ability to choose a Natural Gas Supplier (NGS) to provide them with natural gas supply services.
Section 2208(a) of the Act requires that no entity can engage in the business of an NGS unless it holds a license issued by the Commission. 66 Pa.C.S. § 2208(a). The term NGS is defined, in part, as:
An entity other than a natural gas distribution company, but including natural gas distribution company marketing affiliates, which provides natural gas supply services to retail gas customers utilizing the jurisdictional facilities of a natural gas distribution company.
66 Pa.C.S. § 2202. Further, the term ''natural gas supply services'' is defined, in part, as ''the sale or arrangement of the sale of natural gas to retail gas customers,'' 66 Pa.C.S. § 2202.7
On June 24, 1999, following the passage of the Act, the Commission issued a Tentative Order establishing a draft licensing application for the interim licensing of NGSs. On July 15, 1999, the Commission issued a Final Order, at Docket No. M-00991248F0002, that adopted the interim licensing procedures and license application for NGSs. The Final Order required all suppliers of retail natural gas supply services to obtain an NGS license except those natural gas local distribution companies providing service within their certificated service territories and municipal utilities providing service within their corporate or municipal limits.
Subsequently, in 2000, the Commission adopted a Proposed Rulemaking Order that revised its interim licensing procedures and promulgated proposed regulations governing the licensing requirements for NGSs. See 52 Pa. Code §§ 62.101—62.114. See Licensing Requirement for Natural Gas Suppliers, Proposed Rulemaking Order, Docket No. L-00000150, 30 Pa.B. 3073 (June 17, 2000). The Commission stated that its initial interpretation of the Act had been that every entity that engages in an activity listed as that undertaken by a natural gas supplier must be licensed. However, the Commission's proposed rulemaking acknowledged that some activities may be undertaken by entities that will not have any direct physical or financial responsibility on the procurement of the customer's natural gas. Accordingly, in the proposed regulations, the Commission decided to exempt from licensing two types of entities that worked as brokers or agents for NGSs and retail customers: marketing services consultant and nontraditional marketer. The proposed regulation set forth definitions of the terms ''marketing services consultant'' and ''nontraditional marketer'' and established an exemption from licensing for these entities. See 52 Pa. Code §§ 62.101, 62.102(d) and (e).
The Commission issued its June 2000 Proposed Rulemaking Order and corresponding proposed regulations for public comment. Some commenters supported the exemptions and others, including the Independent Regulatory Review Commission (IRRC), opposed them. In the subsequent Final Rulemaking Order, the Commission determined that marketing services consultants and nontraditional marketers were not engaged in the sale or arranging of natural gas supply services to retail consumers. Thus, the Commission concluded that these two entities fell outside of the definition of an NGS set forth in Section 2202 of the Act.
Furthermore, rather than require these entities to obtain a license themselves, the regulations emphasized that the licensed NGSs would be responsible for any violations of the statute, regulations or orders or for any fraudulent, deceptive or other unlawful marketing or billing acts committed by a marketing services consultant or nontraditional marketer. See 52 Pa. Code § 62.102 (relating to scope of licensure). See also 52 Pa. Code § 62.110(a)(3) (NGSs must identify nontraditional marketers and marketing services consultants who are currently or will be acting as agents for the licensee in the upcoming year).
The regulations were finalized by the Commission in July 2001 in Licensing Requirements for Natural Gas Suppliers, Final Rulemaking Order, Docket No. L-00000150, 31 Pa.B. 3943 (July 21, 2001).
By Order entered January 13, 2012, the Commission initiated a rulemaking to review the scope of the NGS licensing regulations at 52 Pa. Code § 62.101 (relating to definitions) and § 62.102 (relating to scope of licensure). The Commission initiated the instant rulemaking proceeding to determine (1) if its current NGS licensing regulations conform with the plain language of the Act and reflect the current business plans of NGSs appearing before it; and (2) whether continuing certain licensing exemptions was in the public interest.
Specifically, the rulemaking was initiated to address whether or not to maintain the exemptions from the licensing requirement for marketing services consultants and nontraditional marketers. Furthermore, the Commission requested comments on whether it was appropriate to remove responsibility from a licensed NGS for violations of the Public Utility Code, and applicable Commission regulations, orders and directives and for fraudulent, deceptive or other unlawful marketing or billing acts committed by a marketing service consultant or a nontraditional marketer.
In the Proposed Rulemaking Order, the Commission suggested the following revisions to its NGS licensing regulations at 52 Pa. Code §§ 62.101—62.110: (1) deletion of the ''marketing service consultant'' and ''nontraditional marketer'' definitions; (2) the deletion of the exemptions set forth in Subsections 62.102(d) and (e) of the regulations and (3) the deletion of Subsection 62.110(a)(3) that requires a licensee to report the names and addresses of nontraditional marketers and marketing services consultants who are acting or will be acting as agents for the licensee in the upcoming year.
Comments to the proposed revisions were filed by Washington Gas, IRRC, National Energy Marketers Association (NEMA), Spark Energy Gas, LP, Retail Energy Supply Association (RESA) and the Pennsylvania Energy Marketers Coalition (PEMC). Based upon these comments, the Commission suggested further amendments to the NGS licensing regulations to add the definitions ''aggregator,'' ''broker,'' and ''nonselling marketer'' and to incorporate a revised definition of ''nontraditional marketer.'' The Commission issued its further revisions to the proposed regulations as an Advanced Notice of Final Rulemaking (ANOFR), entered February 28, 2013, and invited additional comments.
Specifically, the ANOFR proposed to continue the exemption from licensure for nontraditional marketers, but proposed the following new definition of nontraditional marketers:
Nontraditional marketer—A community-based organization, civic, fraternal or business association, or common interest group that works with a licensed NGS as an agent to market natural gas service to its members or constituents. The nontraditional marketer may not require its members or constituents to obtain its natural gas service through a specific licensed NGS and may not be compensated by the licensed NGS if members or constituents enroll with the licensed NGS. (Emphasis added).
Comments to the ANOFR were filed by the RESA, NEMA, PEMC, the Pennsylvania Independent Oil and Gas Association (PIOGA), and the Office of Consumer Advocate (OCA). While these parties raised concerns related to various aspects of the proposed rulemaking order, which we then addressed in the final rulemaking order, none of the parties expressed opposition to the Commission's proposed new definition of ''Nontraditional marketer,'' and all seemed to agree that it was reasonable to exempt nontraditional marketers from the licensing requirement. However, no party specifically addressed the ''no-compensation'' limitation in the new definition. Accordingly, in the Final Rulemaking Order issued August 15, 2013, the Commission approved the proposed new definition of Nontraditional Marketer that was included in the ANOPR (with minor format changes).
Washington Gas filed the instant petition seeking clarification on one aspect of the Commission's new definition of ''Nontraditional Marketer,'' namely, the portion of the definition that addresses the payment of compensation to Nontraditional Marketers. No responses to the instant petition were filed.
Discussion
The Public Utility Code (Code) establishes a party's right to seek relief following the issuance of our final decisions pursuant to Subsections 703(f) and (g), 66 Pa.C.S. § 703(f) and § 703(g), relating to rehearings, as well as the rescission and amendment of orders. Such requests for relief must also be consistent with Section 5.572 of our Regulations, 52 Pa. Code § 5.572, relating to petitions for relief following the issuance of a final decision. The standards for granting a Petition for Reconsideration were set forth in Duick v. Pennsylvania Gas and Water Company, 1982 Pa. PUC Lexis 4, *12-13 (1982):
A petition for reconsideration, under the provisions of 66 Pa.C.S. § 703(g), may properly raise any matters designed to convince the Commission that it should exercise its discretion under this code section to rescind or amend a prior order in whole or in part. In this regard we agree with the Court in the Pennsylvania Railroad Company case, wherein it was said that: ''[p]arties . . . , cannot be permitted by a second motion to review and reconsider, to raise the same questions which were specifically considered and decided against them . . . '' What we expect to see raised in such petitions are new and novel arguments, not previously heard, or considerations which appear to have been overlooked or not addressed by the Commission. Furthermore, the Commission has held that a Petition for Clarification must meet the same standard as a Petition for Reconsideration.
See Petition of PECO Energy Company for Approval of its Revised POR Program, Docket No. P-2009-2143607 (Opinion and Order issued August 10, 2010).
In considering this Petition, we are reminded that we are not required to consider expressly or at great length each and every contention raised by a party to our proceedings. University of Pennsylvania v. Pa. PUC, 485 A.2d 1217 (Pa. Cmwlth. 1984). Any argument that is not specifically addressed herein shall be deemed to have been duly considered and denied without further discussion.
Since we did not have the benefit of any comments regarding the ''no compensation'' limitation in the proposed rulemaking order and because Washington Gas has raised some legitimate concerns, these are new and novel arguments and, accordingly, we shall exercise our discretion to reconsider our prior determination on this issue.
In its petition, Washington Gas states that the in the final form regulation, the exemption from the licensing requirement for a nontraditional marketer is limited only to those community-based civic, fraternal or business associations that receive no compensation from NGSs. As currently written, the new definition of Nontraditional Marketer set forth in the final form regulation states that ''A Nontraditional Marketer.....MAY NOT BE COMPENSATED BY THE LICENSED NGS IF MEMBERS OR CONSTITUENTS ENROLL WITH THE LICENSED NGS.''
Washington Gas notes that the current regulation at 52 Pa. Code § 62.102 exempt nontraditional marketers from the requirement of obtaining a license because the Commission had determined that nontraditional marketers fall outside of the Act's definition of NGS since they are not engaged in the sale or arranging of natural gas supply to retail customers. Accordingly, the existing regulation permits the use of Community-based Civic, Fraternal or Business Associations to market natural gas services in the Commonwealth. Washington Gas asserts that such arrangements are not unusual, and have proven to be an effective method of expanding energy choice to residential and small business customers.
Washington Gas asserts that it agrees with the Commission that civic and community organizations should not be required to obtain a license in order to market natural gas services to their members. It also asserts, however, that there is no valid reason why the existence of a compensation arrangement between a nontraditional marketer and an NGS should change this conclusion. Washington Gas notes that the existing regulations at 52 Pa. Code §§ 62.101 and 62.102 do not include any limitation that would preclude nontraditional marketers from receiving compensation from NGSs. Conversely, the current regulations clearly do not prohibit the receipt of compensation from an NGS.
Washington Gas asserts that limitation in the new definition of nontraditional marketer could be interpreted to mean that Nontraditional Marketers are not necessarily compensated by the NGS, or that Nontraditional Marketers may or may not be compensated by the NGS. But the Commission should clarify that this language does not mean that Nontraditional Marketers must not be compensated by the NGS.
Washington Gas states that requiring community and civic organizations to obtain an NGS license in order to receive compensation from their NGS partners will have a chilling effect on these arrangements, as most organizations would have no interest in taking the steps necessary to obtain a license and remain compliant with the rules and regulations that go along with being an NGS, as RESA discussed in its comments to the ANOPR, at p. 6.
Furthermore, Washington Gas asserts that the August 15th Final Rulemaking Order does not discuss why such a strict limitation is imposed or the rationale behind its imposition. Accordingly, Washington Gas states that since there in no discussion of the ''no-compensation'' limitation for nontraditional marketers in the Final Rulemak- ing Order, this issue appears to have been overlooked and its Petition for Clarification/Reconsideration should be granted to address fully address this issue.
Alternatively, Washington Gas requests that instead of clarifying its intent regarding the new definition of Nontraditional Marketer, the Commission should revise the new definition to exclude the language which states that the Nontraditional Marketer ''MAY NOT BE COMPENSATED BY THE LICENSED NGS IF MEMBERS OR CONSTITUENTS ENROLL WITH THE LICENSED NGS.'' Washington Gas asserts that removing the limiting language would be consistent with the current regulation and would reflect the current business practices of NGSs in the Commonwealth.
Upon our review and consideration of the Washington Gas' petition, we agree that the definition of Nontraditional Marketer set forth in our prior order should be amended. First of all, the Commission notes that the current regulation, which has been in place since 2001, contains no such limitation on a nontraditional marketer receiving compensation from an NGS, and there was no evidence in the record presented to suggest that there is a need for such a limitation. The Commission acknowledges that no objection has been made by any of the commenters regarding prohibiting a Nontraditional Marketers from receiving some form of compensation from the NGS based on the enrollment of the organization's members.
Furthermore, the receipt of a fee does not bring the Nontraditional Marketer within the Act's definition of ''Natural Gas Supplier,'' because the Nontraditional Marketer will still not be engaged in the sale or arranging of natural gas supply service to retail customers. In situations where a Nontraditional Marketer receives compensation from the NGS, customers still contract directly with the NGS for supply, and the NGS is still responsible for any violations of the statute, regulations, and orders for acts committed by the Nontraditional Marketer.
In the final form regulation in the present docket, the Commission acknowledged that it is reasonable not to require Community-based Civic, Fraternal or Business Associations to obtain an NGS license, on the condition that the organization's members are not required to purchase the services from the endorsed NGS and if the offer is accepted the contract is between the member and the NGS. Accordingly, since no rationale was presented for adding a new limitation to the Nontraditional Marketer definition that would have the effect of requiring licensure for Nontraditional Marketers that receive a fee from an NGS based on members who enroll with the NGS, the Commission will revise the new definition of nontraditional marketer in the final form regulation by deleting this limitation.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on April 3, 2012, the Commission submitted a copy of the notice of proposed rulemaking, published at 42 Pa.B. 2034 (April 14, 2012) and Annex A, to IRRC and the Chairpersons of the House Consumer Affairs Committee and the Senate Consumer Protection and Professional Licensure Committee for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC and the House and Senate Committees were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Department has considered all comments from IRRC, the House and Senate Committees and the public.
Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on April 30, 2014, the final-form rulemaking was deemed approved by the House and Senate Committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on May 1, 2014, and approved the final-form rulemaking.
Therefore,
It Is Ordered That:
1. The regulations of the Commission, 52 Pa. Code Chapter 62, are amended by amending §§ 62.101, 62.102 and 62.110 to read as set forth in Annex A.
2. The Commission hereby grants the Petition for Clarification and/or Reconsideration (Petition) filed by Washington Gas Energy Services.
3. The Commission hereby revises Annex A to its August 15, 2013 Final Rulemaking Order (August 15th Final Rulemaking Order) in the previously-captioned proceeding by modifying the definition of nontraditional marketer set forth in 52 Pa. Code § 62.101 to read as follows:
Nontraditional marketer—A community-based organization, civic, fraternal or business association, or common interest group that works with a licensed NGS as an agent to market natural gas service to its members or constituents. A nontraditional marketer may not require its members or constituents to obtain its natural gas service through a specific licensed NGS.
4. The Secretary's Bureau shall serve a copy of the instant order granting reconsideration of the August 15th Final Rulemaking Order on all jurisdictional natural gas distribution companies, natural gas suppliers, the Office of Consumer Advocate, the Office of Small Business Advocate and all other parties that filed comments at Docket No. L-2008-2069114, Natural Gas Distribution Companies and the Promotion of Competitive Retail Markets.
5. The Secretary's Bureau shall submit the August 15th Final Rulemaking Order, the instant order and revised Annex A to the Governor's Budget Office for review of fiscal impact and the Office of Attorney General for approval as to legality.
6. The Secretary's Bureau shall submit the August 15th Final Rulemaking Order, the instant order and revised Annex A for review by the designated standing committees of both houses of the General Assembly, and for review and approval by the Independent Regulatory Review Commission.
7. The Secretary's Bureau shall certify the August 15th Final Rulemaking Order, the instant order and revised Annex A and deposit them with the Legislative Reference Bureau for publication in the Pennsylvania Bulletin.
8. The final regulations become effective upon publication in the Pennsylvania Bulletin.
9. A copy of the instant order and revised Annex A shall be posted on the Commission's web site at the Office of Competitive Market Oversight's web page.
ROSEMARY CHIAVETTA,
Secretary(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 44 Pa.B. 2965 (May 17, 2014).)
Fiscal Note: Fiscal Note 57-288 remains valid for the final adoption of the subject regulations.
Annex A TITLE 52. PUBLIC UTILITIES PART I. PUBLIC UTILITY COMMISSION Subpart C. FIXED SERVICE UTILITIES CHAPTER 62. NATURAL GAS SUPPLY CUSTOMER CHOICE Subchapter D. LICENSING REQUIREMENTS FOR NATURAL GAS SUPPLIERS § 62.101. Definitions.
The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise:
Act—66 Pa.C.S §§ 2201—2212 (relating to Natural Gas Choice and Competition Act).
Aggregator—An entity, licensed by the Commission, that purchases natural gas and takes title to it as an intermediary for sale to retail customers.
Applicant—A person or entity seeking to obtain a license to supply retail natural gas supply services to retail customers.
Broker—An entity, licensed by the Commission, that acts as an agent or intermediary in the sale and purchase of natural gas that does not take title to natural gas supply.
City natural gas distribution operation—A collection of real and personal assets used for distributing natural gas to retail gas customers owned by a city or a municipal authority, nonprofit corporation or public corporation formed under section 2212(m) of the act (relating to city natural gas distribution operations).
License—A license granted to an NGS under this subchapter.
Licensee—A person or entity that has obtained a license to provide natural gas supply services to retail customers.
Marketing—The publication, dissemination or distribution of informational and advertising materials regarding the licensed NGS's natural gas supply services and products to the public by personal contact, print, broadcast, electronic media, direct mail or by telecommunication.
NGDC—Natural gas distribution company—The term as defined in section 2202 of the act (relating to definitions).
NGS—Natural gas supplier—The term as defined in section 2202 of the act.
Natural gas supply services—The term as defined in section 2202 of the act.
Nonselling marketer—An individual or commercial entity, such as a telemarketing firm, door-to-door salesman or company, or auction-type web site, under contract to a licensed NGS, that provides marketing services to retail customers for natural gas supply services.
Nontraditional marketer—A community-based organization, civic, fraternal or business association, or common interest group that works with a licensed NGS as an agent to market natural gas service to its members or constituents. A nontraditional marketer may not require its members or constituents to obtain its natural gas service through a specific licensed NGS.
Offer to provide service—The extension of an offer to provide services or products communicated orally or in writing to a customer.
Retail gas customer—The term as defined in section 2202 of the act.
Supplier of last resort—A supplier approved by the Commission under section 2207(a) of the act (relating to obligation to serve) to provide natural gas supply services to customers who contracted for natural gas that was not delivered, or who did not select an alternative NGS, or who are not eligible to obtain competitive natural gas supply, or who return to the supplier of last resort after having obtained competitive natural gas supply.
§ 62.102. Scope of licensure.
(a) An NGS, including an aggregator or a broker, may not engage in marketing, or may not offer to provide, or provide natural gas supply services to retail customers until it is granted a license by the Commission.
(b) An NGDC acting within its certified service territory as a supplier of last resort is not required to obtain a license.
(c) The owners/operators of a building or facility that manage the internal distribution system supplying a building or facility and supply natural gas and other related services to occupants of the building or the facility where the owners/operators, and not the occupants, are the direct purchasers of the natural gas supply services are not required to obtain a license.
(d) A nontraditional marketer is not required to obtain a license. The licensed NGS is responsible for violations of 66 Pa.C.S. (relating to Public Utility Code), and applicable regulations of this part, orders and directives committed by the nontraditional marketer and fraudulent, deceptive or other unlawful marketing or billing acts committed by the nontraditional marketer.
(e) A nonselling marketer under contract to more than one licensed NGS is required to obtain a license.
(f) A nonselling marketer under contract to only one licensed NGS is not required to obtain a license. The licensed NGS is responsible for violations of 66 Pa.C.S. and applicable regulations of this part, orders and directives committed by the nonselling marketer and fraudulent, deceptive or other unlawful marketing or billing acts committed by the nonselling marketer.
§ 62.110. Reporting requirements.
(a) A licensee shall file an annual report on or before April 30 of each year, for the previous calendar year. The annual report must contain the following information:
(1) The total amount of gross receipts from the sales of natural gas supply services for the preceding calendar year.
(2) The total amount of natural gas sold during the preceding calendar year.
(3) The names and addresses of nontraditional marketers and nonselling marketers who are currently or will be acting as agents for the licensee in the upcoming year.
(b) A licensee shall be required to meet periodic reporting requirements issued by the Commission to fulfill the Commission's duty under the act pertaining to reliability and to inform the Governor and General Assembly of the progress to a fully competitive natural gas market.
(c) The information requested in this section will be made available for public review upon request to the Commission subject to any rulings on confidentiality made by the Commission.
[Pa.B. Doc. No. 14-1248. Filed for public inspection June 13, 2014, 9:00 a.m.] _______
1 Section 2202 of the Act, 66 Pa.C.S. § 2202, defines natural ''gas supply services'' as including (1) the sale or arrangement of the sale of natural gas to retail customers; and (2) services that may be unbundled by the Commission under section 2203(3) of the Act (relating to standards for restructuring of the natural gas utility industry) and excluding distribution service.
