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More Class Action Suits Filed Against Retail Suppliers Solely Over Whether Pricing Was "Market-Based"

November 25, 2014

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

At least two more lawsuits seeking class action status have been filed against retail suppliers -- this time Direct Energy and Viridian Energy -- whose only allegation is that suppliers' rates were not "market-based" as claimed in various supplier materials.

EnergyChoiceMatters.com first reported that a suit was filed against North American Power with the sole complaint in that suit amounting to an allegation that because North American Power's rates exceeded Commonwealth Edison's rates, North American Power "misled" customers because North American Power promised a market-based rate.

Similar to the suit filed against North American Power, the newly filed suits against Direct Energy and Viridian Energy do not contain any specific allegations of the suppliers promising savings or "low" rates, as earlier suits arising out of the polar vortex have done.

The newly filed suits only allege that Direct and Viridian each said that rates would be market-based. The suits then allege, by comparing the suppliers' rates to utility rates and non-full requirements spot wholesale pricing, that Direct's and Viridian's rates were not market based, because they either exceeded the utility rate, or were increasing when wholesale prices were decreasing.

The suit filed against Direct Energy itself notes that the Direct terms and conditions provide, "After the Initial Term and during the Renewal Period, the rate for electricity will be variable each month at Direct Energy's discretion. The rate may be higher or lower each month based on business and market conditions," seemingly undercutting any basis for the suit (given both Direct's discretion, but more importantly that "business" conditions as well as market conditions affect pricing).

Similarly, the suit filed against Viridian acknowledges that Viridian's T&C's provide that the rates, "will vary based on several factors, including but not limited to, market conditions, operations costs, and other factors," against, explicitly providing that the rate is not solely market-based as the suit would allege, but also based on, "operations costs, and other factors."

While, given these explicit conditions in the T&C's, and given the inherent problems in using either non-full requirements spot wholesale prices, or utility prices, as a comparison for determining whether a price is "market-based" (as previously discussed here), these suits should be dispensed with quickly, the more of these similar market-based suits that are filed, the greater likelihood that one court, unfamiliar with the complexities of serving retail load, takes a flyer and issues a bizarre and precedential ruling.

Both suits were filed in United States District Court for the District of Connecticut:

Direct: No. 3:14-cv-1724

Viridian: No. 3:14-cv-1731

Viridian Energy provided the following statement to Matters:

"Viridian Energy is proud of the value and price certainty we offer consumers in an ever-changing market. We take our commitment to ethical business practices very seriously and believe this complaint is representative of the type of copycat lawsuits that are becoming more commonplace in the retail energy industry. Further, the claim demonstrates a fundamental lack of understanding of how utility, wholesale and energy markets work. Viridian Energy believes this case to be wholly without merit and plans to aggressively defend itself against these claims."

Direct Energy provided the following statement to Matters:

"Direct Energy confirms that it is aware of a class action lawsuit that has been filed in federal court in Connecticut. At this time, Direct Energy has not been served and has no further comment."

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