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PURA Says Supplier May Assign Customers to Competitor at "Own Risk"

November 13, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Connecticut PURA said that it is, "unable to sanction," the transfer of a portion of the customer book Town Square Energy is seeking to assign to Spark Energy, and said that Town Square Energy, "may proceed with the transfer of these customers at its own risk."

As first reported by EnergyChoiceMatters.com, Town Square Energy informed PURA that it intended to transfer over 4,100 accounts to Spark.

PURA, however, initially denied the assignment of 1,417 of these customers whose fixed-rate contracts end in November 2014 and 839 of these customers whose fixed-rate contracts end in December 2014, "based on the grounds that the customers' contracts with TSE will have expired prior to the transfer date and therefore, TSE and these fixed-rate customers will not have valid contracts that can be assigned."

PURA's finding that these 2,250 customers no longer had contracts with Town Square Energy arises from PURA's interpretation of Town Square Energy's terms of service.

As stated by PURA:

"The 'Cancellation/Termination and Notice Period' provision under TSE's Terms of Service states: 'Town Square Energy requests that fixed-rate customers provide 60 days' notice and variable or monthly variable rate customers provide 15 days' notice if they wish to terminate this agreement.' The contract language shows that the agreement between TSE and the fixed-rate customers is the fixed-rate term, and therefore, the agreement expires when the fixed rate ends. The fixed-rate contracts ending in November 2014 will have expired before the 30 days' notice requirement. Further, according to TSE's letter, on or about December 15, 2014, Spark will begin enrolling TSE customers according to their meter read cycle. The fixed-rate contracts that end prior to December 15, 2014, will have expired prior to the transfer beginning on December 15, 2014. As to any remaining contracts that expire between December 15 and December 31, 2014, the proposed transfer will force the customers to receive service beyond the terms of their agreement, since the customers can only switch on their meter read dates. Hence, such transfer would violate the terms of the agreement and would not be in the customers' best interest."

Town Square Energy challenged this finding, arguing that:

"All of these 2256 customers already have received their end of fixed price contract notices from TSE. Accordingly, all such customers will either (1) choose to leave TSE for other suppliers or standard offer (in which case they either will have left prior to closing or will not be transferred and will remain TSE customers until the next meter read date); (2) enter into new fixed price contracts ending sometime in 2015 (in which case the transfer is approved pursuant to Section (3) of the PURA Letter); or (3) where the customer takes no other affirmative action to leave or sign up as with a new fixed price agreement, under the Product Description section of the TSE terms of service (attached as Exhibit A to the Supplier Letter) he or she will automatically become a monthly variable price customer (in which case the transfer is approved pursuant to Section (1) of the PURA Letter). Simply put, contrary to the erroneous assumption in the PURA letter, no TSE customer will be without a valid contract by the time such customers will be switched over to Spark. Consequently, all that have not chosen to leave TSE may be transferred to Spark. The 'request' text for TSE fixed and variable price customers to provide advance notice to TSE in the event of planned contract termination in the TSE Terms of Service (cited in PURA Letter at pp. 2-3) is simply what is says- it is a nonbinding 'request' that seeks to afford TSE a final pre-departure opportunity to win back the customer. It has no bearing on the timing or validity of the Proposed Transfer."

PURA, however, responded:

"Neither TSE nor Spark Energy has affirmed that it will send the customer a notice of the expiration of fixed rate term and the commencement of the month-to-month variable rates pursuant to Conn. Gen. Stat. §16-245o(g)(2), and it is unclear whether the companies will take the position that such notices are not required because these contracts were entered into before the effective date of Conn. Gen. Stat. §16﷓245o(g)(2). The Authority is mostly concerned about the effect of the contract assignment on the affected customers. The font of the TSE Terms of Service is extremely small (approximately Arial 7 points), and the provision regarding a 'customer not making a choice being automatically placed on a monthly variable rate at the expiration of their initial term' is buried in the Terms of Service and not sufficiently highlighted for the customers to truly be informed. When a customer entered into a fixed-rate contract with TSE, the customer would not have known nor had reasons to anticipate that he/she would automatically become a monthly variable rate customer with Spark Energy at the end of the fixed-rate term without having the opportunity to cancel in time. However, such scenario would likely result for some of these 2,256 customers if proper notices were not given. Even with the 30 days' notice of the assignment, customers will not have sufficient time to switch to another electric supplier before incurring liability with Spark Energy."

PURA continued:

"The proposed customer notice TSE provided in its October 31, 2014 letter did not include any rates information. It simply stated in parts: 'Your Terms of Service will remain the same ... If you have variable rate, Spark Energy will also continue to supply electricity at variable pricing...' Depending on the language of the renewal notice, a customer may not even be aware that he/she is a variable rate customer. Furthermore, this proposed notice does not provide sufficient information to the customers, as the customer will not know Spark Energy's rates until the customer gets the bill after an entire month's use. Even if the customer then takes immediately steps to switch to another supplier, the switch will take another month, and possibly two months, to take effect. (Although a residential customer could switch to Standard Service within 72 hours, the customer will have to remain there for an entire billing period, possibly another unattractive choice for the customer. Commercial customers do not even have such a choice.) Thus, the customers will be forced to take service from Spark Energy at a rate unknown to the customers at the time of the assignment for at least two billing periods, during peak winter 2014 months. To protect customers from this situation, the Authority imposed the additional notice text in its November 4, 2014 ruling, requiring Spark Energy's rates to be disclosed."

PURA therefore said:

"Without having reviewed the contract renewal notices TSE claimed to have sent to these customers, the Authority is unable to validate whether the contracts have been properly renewed, and therefore, unable to sanction the assignment of these 2,256 customers."

PURA said that TSE, "may proceed with the transfer of these customers at its own risk."

PURA further directed that, if any such assignments are made, TSE's customer assignment notice must include revisions and additional notice text proposed by PURA.

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