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Conn. Draft Would Prohibit Suppliers' Automatic Invalidation Clauses (Automatic Re-enrollment)
September 30, 2011
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A draft Connecticut PURA decision (10-06-24) would prohibit the use "Automatic Invalidation Clauses" in electric supplier contracts with customers.
Automatic invalidation clauses, or automatic re-enrollment clauses, are used by suppliers to automatically re-enroll departing customers without obtaining a new authorization, relying instead on the customer's past, original authorization to enter the contract, and a clause in the original contract allowing the supplier to automatically re-enroll the customer in any circumstance in which an EDI drop is received and the customer had not previously communicated to the supplier their intent to leave the supplier.
Once common in New York until outlawed, suppliers spin such clauses as protection against "slamming," by purportedly preventing any switches not approved by the customer (with such approval only manifesting itself through prior notice to the original supplier).
In Connecticut, the issue arose after the PURA identified the use of an automatic invalidation clause by ResCom Energy, with ResCom stating that it borrowed the language from a Dominion Retail terms of service (see 6/16).
The draft finds that automatic invalidation clauses conflict with Conn. Gen. Stat. §16-245s, as amended.
"This statute provides that no EDC shall execute a change in a customer's selection of electric supplier unless the change has been verified and confirmed by one of the four enumerated methods. It follows conversely that, if a customer's selection of an electric supplier has been confirmed by one of the four prescribed methods, the EDCs would be required to execute the change in the customer's choice supplier. Additionally, Conn. Gen. Stat. §16-245q, as amended, specifically provides that a customer 'may change his electric supplier at any time.' Therefore, the Authority determines that Conn. Gen. Stat. §16-245s and §16-245q working together effectively prohibit the automatic invalidation clauses. Further ... the billing and metering protocols adopted pursuant to Conn. Gen. Stat. § 16-244i(c) indicate in part that an enrolling customer '... does not need to be concerned about dropping the old Supplier.' That is clearly not the case with automatic invalidation clause," the draft finds
"It has not been established that electric suppliers were ever authorized to unilaterally deem residential customer cancellations invalid, even though a customer may have agreed to such a contract term months or years before," the draft continues.
"The proposition that the automatic invalidation clause is intended to shield the customer from an unauthorized switch has not been substantiated anywhere near a point that would tip the scale in favor of such a policy. Instead, the multiple back-and-forth contacts that result among the customer wishing to switch suppliers, the EDC attempting to coordinate the switch, the former supplier clawing the customer back, and the new supplier establishing an account for a new and willing customer, only serves to gum up a process intended to be simple and transparent," the draft states.
"Based on the foregoing, the Authority hereby prohibits the use of automatic invalidation clauses by any electric supplier, effective the date of this Decision. Electric suppliers shall immediately cease to use such terms on any contracts, and cease to attempt to enforce such terms embedded in contracts that may predate this ruling," the draft would order.
Based on this language, it does not appear PURA would take action against suppliers for prior use of the automatic invalidation clauses, though the draft is not explicit on this point.
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