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Texas ROSE Alleges REP's Prepaid Plan Violates Rules, Citing Affidavit From Former Contractor

May 20, 2014

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Copyright 2010-14
Reporting by Paul Ring •

The Texas Ratepayers' Organization to Save Energy petitioned the Public Utility Commission of Texas to conduct an investigation into the policies and practices of Direct Energy in offering residential consumers a prepaid electric service plan known as Power-to-Go, alleging that the product, "violates certain PUC customer service protection rules, uses deceptive marketing, and discriminates against customers on the basis of income."

Among other things, Texas ROSE alleged that Direct Energy has enrolled critical care customers, who by rule are ineligible for prepay service, onto its prepaid plan.

Texas ROSE presented an affidavit from an individual represented to be a former employee of a contractor used by Direct for customer care, and such individual alleged that, "critical care patients are nevertheless regularly enrolled in the Power-To-Go product."

While Direct Energy allegedly makes a notation in the customer's account that such customer should be transferred to post pay service if the customer later self-identifies as critical care, the individual alleges that, [i]f the customer has poor credit, cannot afford the deposit required for Postpay, or has an active DPP [deferred payment plan] switch hold on the account, the critical care customer is unable to switch to Postpay and remains on Power-To-Go; no further resolution actions are taken."

Texas ROSE also alleged that switch-holds are automatically placed on any Direct account that has a deferred payment plan, while Texas ROSE claimed that the Substantive Rules only allow switch-holds to be placed in certain deferred payment plan situations, such as plans arising from an extreme weather emergency

However, Subst. R. §25.480(j)(7) states, "A REP may apply a switch-hold while the customer is on a deferred payment plan," and we see nothing limiting switch holds to certain types of deferred payment plans (unlike the clear limits on switch holds for average/level payment plans).

And Subst. R. §25.480(j) does not limit deferred payment arrangements to only those described by ROSE as arising under §25.480(j)(1), such as the weather moratorium-driven plans, as §25.480(j)(4) provides that, "A REP may voluntarily offer a deferred payment plan to customers who have expressed an inability to pay."

Matters does understand that Staff has taken the position that a deferred payment plan cannot be created at enrollment to create an instant switch-hold (a practice allegedly used by some REPs), but in cases where a bona fide deferred payment plan exists, Matters is not aware of any limits on that application of a switch hold based on a review of §25.480 and the rule's preamble, which states of §25.480(j)(7), "The commission concurs with the REP Group that it would provide a clearer picture of the switch-hold process to state that a REP may apply a switch-hold while the customer is on a deferred payment plan."

Texas ROSE also alleged "chronic communication problems in major cell phone systems that prevent customers from receiving Power-to-Go account updates and disconnection notices."

However, Texas ROSE conceded that text messaging is permitted under the rule so Direct would be in "technical" compliance with the rules, but ROSE argued that the communication problems should prompt an investigation into whether the rules need to be modified to protect customers.

The individual's affidavit presented by ROSE alleges, "Direct Energy as a matter of policy does nothing to ensure that failed messages are delivered by some other method. During the course of my employment I handled numerous calls from frustrated or enraged customers who had lost power without receiving any warning messages, despite assurances given during enrollment that this would not happen. On several different occasions when I asked a supervisor how to compensate customers for this error, I was told that the customer was probably lying about not receiving the messages. When I pointed out that the system had automatically notated a series of message delivery failures on the account, I was told that it was the customer's own fault for failing to report the problem until it was too late. When I pointed out that the notated account showed records of multiple inbound customer calls attempting to resolve the problem, I was told that it was the customer's fault for failing to provide an alternative avenue for successful message delivery."

Texas ROSE further alleged that Power-to-Go marketing materials are "deceptive" due to the "inaccurate" comparison of prepaid service to filling up a car with gasoline.

ROSE said that the marketing materials, "lead the customer to believe that they can run out their electric meter and fill it up in real time as it happens."

"Practically speaking there is no real time consumer transaction involving Power-to-Go. Billing is based on estimated, not actual, usage over the next 24 hour period. There is also a one- or two-day time lag in posting usage to the account. Thus, negative balances can sneak up on customers because of the time lag in tracking usage and the use of estimated future usage. Customers are often surprised and frustrated because they believed buying prepaid service was 'like putting gas in a car,' and they would know how long they had between 'fill-ups' - that is, how long the customer's prepayment would last," Texas ROSE alleged.

Texas ROSE also alleged that the prepaid product was targeted at low-income and similar vulnerable customers and said that, "Having an electricity product such as Power-to-Go targeted toward low-income consumers and vulnerable persons with payment problems is potentially a discriminatory marketing practice not permitted under PURA."

Click here to see Texas' ROSE petition

In a statement on the ROSE petition, Direct Energy said that it, "takes matters such as these very seriously. We will be declining further comment as we are still looking at the filing."

Docket 42524

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