| (II) a domestic office of a foreign bank with an investment-grade
credit rating.
(iii) The escrow account agreement must provide that
the account holds only customer deposits, prepayments, or both, and
that the customer deposits will be held in trust by the escrow agent
and will not be the property of the REP or in the REP's control, unless,
if allowed by the REP's terms of service, the customer deposits are
applied to a final bill or to satisfy unpaid amounts.
(F) Irrevocable stand-by letters of credit provided
under paragraphs (1) and (2) of this subsection must use the standard
form irrevocable stand-by letter of credit template approved by the
commission. The original document of the irrevocable stand-by letter
of credit must be provided in a manner established by the commission.
(i) The irrevocable stand-by letter of credit must
be maintained at a financial institution that is supervised or examined
by the Board of Governors of the Federal Reserve System, the Office
of the Comptroller of the Currency, or a state banking department
and is a:
(I) U.S. domestic bank; or
(II) a domestic office of a foreign bank with an investment-grade
credit rating.
(ii) The irrevocable stand-by letter of credit must:
(I) be irrevocable for a period not less than twelve
months;
(II) automatically renew, and only expire if prior
notice is provided to the commission at least 90 days before the expiration
and commission staff signs the notice of non-renewal to acknowledge
that the notice was received 90 days before the expiration;
(III) be payable to the commission;
(IV) permit a draw to be made in part or in full;
(V) permit a draw to be made with the return of the
original document or a photocopy;
(VI) permit a draw to be made, among other ways, through
over-night mail;
(VII) permit the commission's executive director or
the executive director's designee to draw on the irrevocable stand-by
letter of credit; and
(VIII) require commission staff approve all amendment
requests to decrease the value of the irrevocable stand-by letter
of credit prior the value of the irrevocable stand-by letter of credit
decreasing. Amendments to decrease the value of the irrevocable stand-by
letter of credit must be accompanied by a notarized affidavit signed
by an executive officer of the REP and include, as applicable, the
current number of ESI IDs the REP serves, the value of customer deposits
and prepayments the REP is liable for.
(G) Irrevocable guaranty agreements must be executed
on the commission approved standard form irrevocable guaranty agreement
and must obligate the guarantor to meet commission's demands on behalf
of the applicant. A copy of the executed irrevocable guaranty agreement
must be provided in the manner established by the commission.
(i) The guarantor's obligation to satisfy a commission
demand for payment must be in an amount not less than $1,500,000 and
must be absolute, and the guarantor may not avoid its obligation for
any reason.
(ii) The irrevocable guaranty agreement must automatically
renew and only expire if prior notice is provided to the commission
at least 90 days before expiration. Commission staff must sign a notice
of non-renewal to acknowledge that the notice was received at least
90 days prior to the date of expiration. Any notices or amendments
must be provided to the commission in a commission approved method.
Until the 90 days advance notice has elapsed or until an amendment
to the REP's financial qualifications is approved, whichever occurs
first, the guarantor must remain completely and absolutely liable
to the extent provided by the terms of the agreement.
(H) A power purchase agreement must be documented by
providing a copy of the executed agreement between the applicant and
the guarantor.
(5) Commission draw on financial instruments. The commission
may seek full or partial funds from a REP's financial resources in
any of the following circumstances:
(A) An applicable independent organization performs
a mass transition of a REP's customers under §25.43 of this title;
(B) The commission issues an order revoking a REP's
certificate;
(C) ERCOT terminates a REP's SFA or the applicable
independent organization terminates a similar agreement and the REP's
financial resource expires in 30 days less; or
(D) The commission's executive director determines
that a REP has failed to satisfy its financial obligations under PURA,
the commission's substantive rules, or the applicable independent
organization's protocols; and the financial resource expires in 30
days or less.
(6) Proceeds from financial instruments.
(A) Proceeds from an irrevocable stand-by letter of
credit or irrevocable guaranty agreement provided under this subsection
may be used to satisfy the following obligations of a REP, in the
following order of priority:
(i) first, if available, to assist in the payment of
residential customer deposits to retail electric providers that volunteer
to provide service in a mass transition event under §25.43 of
this title of low-income customers as identified by the Low-Income
List Administrator under §25.45 of this title (relating to Low-Income
List Administrator);
(ii) second, if available, to assist in the payment
of residential customer deposits to retail electric providers that
are designated to provide service in a mass transition event under §25.43
of this title of low-income customers as identified by the Low-Income
List Administrator under §25.45 of this title;
(iii) third, if available, to assist in the payment
of residential customer deposits to retail electric providers that
volunteer to provider service in a mass transition event under §25.43
of this title, and to retail electric providers that are designated
to provide service in a mass transition event under §25.43 of
this title;
(iv) fourth, for services provided by the independent
organization related to serving customer load;
(v) fifth, for services provided by a TDU; and
(vi) sixth, for administrative penalties assessed under
Chapter 15 of PURA or commission rules.
(B) Proceeds from an irrevocable stand-by letter of
credit or irrevocable guaranty agreement provided under this subsection
must, to the extent that the proceeds are not needed to satisfy an
obligation set out in subparagraph (A) of this paragraph, be paid
to the applicable entity identified as the Applicant on the irrevocable
stand-by letter of credit or the Guarantor on the irrevocable guaranty
agreement.
(g) Persons prohibited from exercising control. An
Option 1 REP must maintain compliance with this subsection at all
times. This subsection does not apply to an Option 2 or Option 3 REP.
(1) In no instance may any of the following persons
control the REP or be relied upon to meet the requirements of subsections
(d) and (e) of this section:
(A) A person who was a principal of a market participant,
at any time within the six months prior to the market participant:
(i) experiencing a mass transition of the REP's customers
under §25.43 of this title;
(ii) having their ERCOT SFA, or similar agreement for
an independent organization other than ERCOT terminated; or
(iii) exiting an electricity or gas market with outstanding
payment obligations that, at the time of the application or amendment,
remain outstanding; or
(B) A person who, by commission order, is prohibited
from serving as a principal for any commission-regulated entity.
(2) If an independent organization or TDU is aware
that a person who is otherwise barred from exercising direct or indirect
control over a REP is acting in violation of this section or other
commission substantive rules, the independent organization or TDU
has an affirmative duty to report this information to the division
of the commission charged with enforcement of the commission's substantive
rules.
(h) Update or relinquishment of certification. A REP
must maintain and update the information required by subsections (d),
(e), and (f) of this section, as applicable, on an ongoing basis.
(1) A REP must electronically submit updated information
in the manner established by the commission within five working days
of any change to its contact information as identified in subsection
(d)(1)(D) or this section.
(2) A REP must apply to amend its certification within
ten working days from the occurrence of a material change to its certification.
A REP may apply for the commission to approve a material change by
filing an application to amend its certification before the material
change is anticipated to occur. A material change includes:
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