About

Archive

Contact

Consulting

Abbreviations

Search

Ontario Energy Board Fines Summitt Energy Management $299,000 for Consumer Protection Violations

Email This Story
November 19, 2010

The Ontario Energy Board has issued an administrative penalty and costs totaling up to $299,000 against Summitt Energy Management related to sales agent activities that the Board found contravened the Ontario Energy Board Act, 1998 (all dollar amounts Canadian).

The case against Summitt involved allegations that five of its sales agents had engaged in unfair practices while signing customers onto energy contracts.

A Panel of the Board ruled on the case following an extensive hearing, and determined that Summitt and its sales agents contravened the requirements of the applicable legislation, regulation, and Codes of Conduct.

An administrative penalty of $234,000 is intended to address the contraventions and is in accordance with Ontario Regulation 331/03, which sets out the criteria for determining the amount of the penalty set by the Board.  The balance of the penalty represents costs of the Board's investigation.

The Board also ordered Summitt to procure an independent review and audit of the revised sales practices used by its retail salespersons, and ordered Summitt to file the result of the review and audit with the Board by January 15, 2011.

In cases where the Board made a finding of non-compliance, Summitt must cancel, without penalty or cost, the electricity or natural gas supply contracts entered into by each of the complainants, and must compensate them.

The Board did not believe that suspending Summitt's door-to-door sales activities was the appropriate approach at this time, but the Board could reconsider this issue if it is not satisfied with the result of the review and audit.

The Board's order cited a number of concerns regarding Summitt's marketing practices.  For example, the Board found that, "[i]t was clear from the testimony of Summitt's salespersons that a few hours of training was not an adequate foundation for someone who is expected to go into homes to sell these very significant contracts to relatively uninformed consumers on the basis of price comparisons or promises of lower prices."

In particular, the Board expressed concern with Summitt's "two part" contract which included a "Registration Form," and a "Customer Agreement with Terms and Conditions."

"The initial contractual document was curiously entitled 'Registration Form,'" the Board said.  "This is the document that was signed by the prospective customer at the doorstep.  In Summitt's view, the execution of this 'Registration Form' creates a complete contractual nexus with the customer once the separate Customer Agreement with Terms and Conditions document was delivered.  It is noteworthy that this initial document is ambiguous as to its status as a binding contractual document.  Certainly the title of the document seems to create an impression that the prospective customer is merely registering for a program, or signing up to receive further information, rather than entering into a long-term fixed-price contract for the provision of electricity, natural gas, or both," the Board said.

Additionally, the Board said that the "Customer Agreement with Terms and Conditions" which the Registration Form references, "is also presented in a very ambiguous manner."

"The document looks like a promotional brochure intended to encourage parties to enter into a contractual relationship, and not as an integral, indeed critical, element of an existing contractual relationship," the Board said.

"From the evidence before the Board, it appears that the retail salespersons did not refer to the Registration Form as a binding contractual document when selling to customers and instead referred to it as an 'application' or 'registration'.  The Board heard repeatedly that the retail salesperson would fill in all of the information on the form, often in advance of the door-to-door visit. In many cases, customers clearly had no appreciation of the impact of signing the Registration Form until well after their interaction with the retail salesperson was over.  Moreover, the retail salespersons repeatedly described the document containing the terms and conditions as a 'brochure' during their evidence and appear to have used that term when speaking with the customers.  Most tellingly, none of the retail salespersons specifically referred the prospective customers to any of the specific terms or conditions contained in the 'Customer Agreement with Terms and Conditions' even though it contained important details of the contractual arrangement, including terms relating to liquidated damages and termination of the contract that strongly favoured Summitt," the Board said.

The Board also had "serious concerns" with the price representations contained in Summitt's brochures.  "The trendlines in these brochures typically misrepresented the actual market price of the respective commodities at the time the sale was being made and illustrated a fixed price that was lower than what the customer was actually being offered under Summitt's program," the Board said.

"Another shortcoming of Summitt's comparative pricing information is that it did not take into account the Provincial Benefit," the Board added.

The Board also said that the required reaffirmation call was, "rarely described as what it was intended to be - an opportunity for the consumer to review the contractual terms and reaffirm or not reaffirm a long term fixed price contract for the supply of electricity and/or natural gas."  

Instead, the Board found that agents described the call as, "a confirmation that the retail salespersons had in fact attended at the house of the prospective customer ... [or] [i]n other instances it was described as a quality assurance kind of exercise where the performance of the agent would be vetted by the head office."

"It appears to the Board that the effectiveness of the reaffirmation call as a genuine cooling off device was fatally undermined by the fundamental misunderstanding created by the retail salesperson during the sale," the Board said.

Accordingly, "[t]he Board does not find this is to be a case of five rogue agents.  As detailed above, a substantial contributor to the misunderstanding of prospective customers about the true nature of the contractual arrangement they were entering was not rooted in the actions of the retail salespersons, but rather directly in the organization of the sale devised and designed by Summitt itself.  Further, the Board finds that while Summitt may have had, on paper, a compliance program, in all of the circumstances it fell far short of any reasonable standard in its operation," the Board said.

The Board's 56-page order, which examines agent behavior in more depth and also addresses legal questions such as absolute versus strict liability and a defense of due diligence, can be found here, or in docket EB-2010-0221.


Email This Story

HOME

Copyright 2010 Energy Choice Matters.  If you wish to share this story, please email or post the website link; unauthorized copying, retransmission, or republication prohibited.

 

Be Seen By Energy Professionals in Retail and Wholesale Marketing

Run Ads with Energy Choice Matters

Call Paul Ring

954-205-1738

 

 

 

 

 

Energy Choice
                            

Matters

About

Archive

Contact

Consulting

Abbreviations

Search