(a) Scope. This section addresses enforcement actions related to administrative penalties or disgorgement of excess revenues only and does not apply to any other enforcement actions that may be undertaken by the commission or the commission staff.
(b) Definitions. The following words and terms, when used in this section, have the following meanings unless the context indicates otherwise:
  (1) Affected wholesale electric market participant--An entity, including a retail electric provider (REP), municipally owned utility (MOU), or electric cooperative, that sells energy to retail customers and served load during the period of the violation.
  (2) Excess revenue--As defined in §25.503 of this title (relating to Oversight of Wholesale Market Participants).
  (3) Executive director--The executive director of the commission or the executive director's designee.
  (4) Person--Includes a natural person, partnership of two or more persons having a joint or common interest, mutual or cooperative association, and corporation.
  (5) Violation--Any activity or conduct prohibited by the Public Utility Regulatory Act (PURA), the Texas Water Code (TWC), commission rule, or commission order.
  (6) Continuing violation--Except for a violation of PURA chapter 17, 55, or 64, and commission rules or commission orders adopted or issued under those chapters, any instance in which the person alleged to have committed a violation attests that a violation has been remedied and was accidental or inadvertent and subsequent investigation reveals that the violation has not been remedied or was not accidental or inadvertent.
(c) Amount of administrative penalty for violations of PURA or a rule or order adopted under PURA.
  (1) Each day a violation continues or occurs is a separate violation for which an administrative penalty can be levied, regardless of the status of any administrative procedures that are initiated under this subsection.
  (2) The administrative penalty for each separate violation of PURA or of a rule or order adopted under PURA may not exceed the limits established by §25.8 of this title (relating to Classification System for Violations of Statutes, Rules, and Orders Applicable to Electric Service Providers).
  (3) The amount of the administrative penalty must be based on:
    (A) the seriousness of the violation, including the nature, circumstances, extent, and gravity of any prohibited acts, and the hazard or potential hazard created to the health, safety, or economic welfare of the public;
    (B) the economic harm to property or the environment caused by the violation;
    (C) the history of previous violations;
    (D) the amount necessary to deter future violations;
    (E) efforts to correct the violation;
    (F) adherence to an applicable voluntary mitigation plan approved by the commission under §25.504 of this title (relating to Wholesale Market Power in the Electric Reliability Council of Texas Power Region); and
    (G) any other matter that justice may require, including, but not limited to, the respondent's timely compliance with requests for information, completeness of responses, and the manner in which the respondent has cooperated with the commission during the investigation of the alleged violation.
(d) Amount of administrative penalty for violations of the TWC or a rule or order adopted under chapter 13 of the TWC.
  (1) Each day a violation continues may be considered a separate violation for which an administrative penalty can be levied, regardless of the status of any administrative procedures that are initiated under this subsection.
  (2) The administrative penalty for each separate violation may be in an amount not to exceed $5,000 per day.
  (3) The amount of the penalty must be based on:
    (A) the nature, circumstances, extent, duration, and gravity of the prohibited acts or omissions;
    (B) the degree of culpability, including whether the violation was attributable to mechanical or electrical failures and whether the violation could have been reasonably anticipated and avoided;
    (C) the demonstrated good faith, including actions taken by the person, affiliated interest, or entity to correct the cause of the violation;
    (D) any economic benefit gained through the violations;
    (E) the amount necessary to deter future violations; and
    (F) any other matters that justice requires.
(e) Initiation of investigation. Upon receiving an allegation of a violation or of a continuing violation, the executive director will determine whether an investigation should be initiated.
(f) Report of violation or continuing violation. If, based on the investigation undertaken in accordance with subsection (e) of this section, the executive director determines that a violation or a continuing violation has occurred, the executive director may issue a report to the commission.
  (1) Contents of the report. The report must state the facts on which the determination is based and a recommendation on the imposition of an administrative penalty, including a recommendation on the amount of the administrative penalty and, if applicable under §25.503 of this title, a recommendation that excess revenue be disgorged.
  (2) Notice of report.
    (A) Within 14 days after the report is issued, the executive director will give written notice of the report to the person who is alleged to have committed the violation or continuing violation which is the subject of the report. The notice may be given by regular or certified mail.
    (B) For violations of the TWC or a rule or order adopted under chapter 13 of the TWC, within ten days after the report is issued, the executive director will, by certified mail, return receipt requested, give written notice of the report to the person who is alleged to have committed the violation or continuing violation which is the subject of the report.
    (C) The notice must include:
      (i) a brief summary of the alleged violation or continuing violation;
      (ii) a statement of the amount of the recommended administrative penalty;
      (iii) a statement recommending disgorgement of excess revenue, if applicable, under §25.503 of this title;
      (iv) a statement that the person who is alleged to have committed the violation or continuing violation has a right to a hearing on the occurrence of the violation or continuing violation, the amount of the administrative penalty, or both the occurrence of the violation or continuing violation and the amount of the administrative penalty;
      (v) a copy of the report issued to the commission under this subsection; and
      (vi) a copy of this section, §22.246 of this title (relating to Administrative Penalties).
    (D) If the commission sends written notice to a person by mail addressed to the person's mailing address as maintained in the commission's records, the person is deemed to have received notice:
      (i) on the fifth day after the date that the commission sent the written notice, for notice sent by regular mail; or
      (ii) on the date the written notice is received or delivery is refused, for notice sent by certified mail.
(g) Options for response to notice of violation or continuing violation.
  (1) Opportunity to remedy.
    (A) This paragraph does not apply to a violation of PURA chapters 17, 55, or 64; PURA §35.0021 or §38.075; or chapter 13 of the TWC; or of a commission rule or commission order adopted or issued under those chapters or sections.
    (B) Within 40 days of the date of receipt of a notice of violation set out in subsection (f)(2) of this section, the person against whom the administrative penalty or disgorgement may be assessed may file with the commission proof that the alleged violation has been remedied and that the alleged violation was accidental or inadvertent. A person who claims to have remedied an alleged violation has the burden of proving to the commission both that an alleged violation was remedied before the 31st day after the date the person received the report of violation and that the alleged violation was accidental or inadvertent. Proof that an alleged violation has been remedied and that the alleged violation was accidental or inadvertent must be evidenced in writing, under oath, and supported by necessary documentation.
    (C) If the executive director determines that the alleged violation has been remedied, was remedied within 30 days, and that the alleged violation was accidental or inadvertent, no administrative penalty will be assessed against the person who is alleged to have committed the violation.
Cont'd...